Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
Hello. My name is John Watts. I want to welcome you to our webinar where we talk about consumer protection questions. Today is August 21st. As we do typically every Friday, we're going to answer some questions. I have 5 questions. One of which is on foreclosure and then 4 of the questions relate to judgments. We've been getting a lot of questions about judgments. We'll go ahead and handle those this week.
Just a little quick reminder of how we do this. These are questions that come from you, come from people that call our firm. Some people leave us a comment on our website, Alabama Consumer. If you live in Alabama, you can call our firm 205-879-2447. You can also leave a comment or send a private message here on Youtube. However you want to get the question to us, that's fine. We just keep track of what questions we've received during the week and then we try to answer those on Friday.
Our first question, and this is related to foreclosure, what is a deed in lieu?
Let's take those words. A deed is just the ownership, you might say, to your property. Then, we say in lieu of or instead of, instead of what? Well, instead of a foreclosure. It's as if I take my deed and I say to the mortgage company, "You know what? Instead of you foreclosing and you taking the deed, how about I just hand it to you?" You might think of this, some on a car context, it's like instead of a repossession, you voluntarily take your car to the dealership or to the bank.
There are different ways that this can impact you as far as credit reporting, deficiency. Deficiency is as if you have this much and the bank sells property for this much. Do you owe that difference? Sometimes, in a deed in lieu, we make an agreement and it's all going to be in writing. You got to have all this written down. What if they come after you for deficiency, what will they put on the credit reporting? Sometimes, they call it a "foreclosure".
You state to know exactly what the deal is before you decide if this is a good approach. This is really the broad level or top levels call loss mitigation. Underneath loss mitigation, we go down and we have loan modification, forbearance, short sell, other things including deed in lieu of foreclosure.
If you're talking to your mortgage company or maybe your real estate agent says, "You can go a deed in lieu." Just to understand what their talking about, is you hand the mortgage company the deed in lieu of instead of them foreclosing. Sometimes that's appropriate, sometimes there are whole lot better options than that, but that is one option for you.
Alright. Our next question is, will bankruptcy override a judgment on my credit report?
Which hurts me the most?
Well, let me take that a little bit out of order. Is it better to have a bankruptcy or better to have a judgment? It depends. Both of those are negative on your credit report. We look at the timing. Generally, anything that happens bad here, the next it has the most impact. The next day, it starts to slowly go down. Really, I mean like the next month or the next 6 months or next year.
Here's the worse that happens and then it starts declining because ... That makes sense if you think about it. If somebody failed to make a payment, would you rather that have been 6 years ago or 6 days ago if they're wanting you to loan them money? We do look at the timing of it. Generally, a bankruptcy and I assume, what's meant here is that Chapter 7 Bankruptcy. It just wipes it out. It's also called a "straight bankruptcy".
A bankruptcy will normally wipe out the judgment so you do not owe the judgment anymore. In terms of which is worse, let me give you this example. If somebody says, "I think I'm gonna have some judgment against me. I'll just wait until I get the judgments that I'm pretty sure of it coming. And so, it happens now and then I'll file bankruptcy." That's fine, but what if you could file bankruptcy before the judgments? Well see if you do that, a bankruptcy stops a lawsuit and there are exceptions on these but normally that happens.
If that debt is wiped out in the Chapter 7, then there is no judgment. Sometimes it's a timing issue. Do I go ahead, pull the trigger, file bankruptcy? I think bankruptcy is very rarely appropriate but it can be appropriate. Do I do that now and then I don't ever have a judgment or do I get a judgment and then after the judgment, I've got to file bankruptcy?
In a perfect world, we would rather just have a bankruptcy and no judgments but if you have a judgment, then a bankruptcy can certainly help by getting rid of that debt. As far as the impact on your credit score, it just really depends. There's a lot of factors. Are you discharging a car loan judgment? That might have more meaning to an auto dealer or auto finance company. Then, if we're talking about a $5,000 medical bill or debt. It just really depends.
The first part of this question, will bankruptcy override a judgment? I assume, what was meant there is if I have a judgment, $5,000 and then I filed bankruptcy, does that make this go away? It doesn't make the actual judgment go away, but what it does is it mean you owe $0 on that judgment. That "debt", that liability is gone.
You have to be careful. There's a judgment and there's a lean put on your property. That lean doesn't just automatically go away because you filed bankruptcy. Sometimes you have to do something in bankruptcy court to "avoiding the lean"
or getting rid of the lean. That gets into some complicated stuff but just to understand that normally, a Chapter 7 bankruptcy wipe out a typical judgment. A bankruptcy and a judgment are bad on your credit report.
I don't know that it's necessarily worse if you have, let's say, 3 or 4 judgments, and then you file a bankruptcy. Yes, it's bad to file a bankruptcy but getting rid of those judgments can be very helpful, too. Anyways, lots of questions to ask if you sit down with a bankruptcy attorney about, what will happen with this judgments? What happens to any leans? What does it do to my credit report? I hope this is at least giving you some information about this.
Alright. Our next question is how long can somebody collect on a judgment?
I'll give you some general rules. In Alabama, if a judgment happens, let's say, in 2015, they can collect on that really for about 10 years. Even after that, they can do something called renewing a judgment before another 10 years. Sometimes, we get people that call us and they say, "Hey, there was a judgment against me in 2007. That's 8 years ago because it's now 2015. I think statue limitations run on that."
Statue limitation is how long the soon I have to sue you. Here's the thing we did wrong: broke a contract, run a red light, whatever it is. We did something wrong. There's a period of time to sue us. That's statue limitation. But once that sue is filed, and if it was filed within the right time, then we don't care about statue limitation anymore.
That law suit could take 20 years. Very unusual but it could take 20 years. That's fine. They get a judgment. Now, they can collect as long as that judgment is valid. Just to understand, statue limitation, because we get a lot of these questions, that's the time period to sue in the first place but then after that, statue limitation does not apply.
Our next question is, do judgments really double every 6 years or does it just seem that way with interest?
Let's start about, we get a judgment. From that point forward, that judgment is making interest. It depends on what the interest rate is. It used to commonly be 12%. Now, it's typically a little bit lower than that but if somebody sued you on a contract and they can prove what the interest rate of that contract is, it can be higher than that. Imagine you have a credit card at 29% interest and they get a judgment, it could be a really higher rate of interest. They don't normally ask for that high but that's possible.
Do judgments really double in 6 years? There's no law that says, "Every 6 years, you will double." It's just that interest. How do we figure out how quickly something will grow? There's a rule of thumb called the "rule of 72". I just say, you take the interest rate whether we're talking about an investment, a debt, whatever we're talking about.
You divide that into 72. If it's 12% interest, divide it into 72, 6. In about 6 years, that will double. Let's say it's $5,000 judgment, 6 years later, it's $10,000. Then another 6 years, that $10,000 becomes $20,000. Another 6 years, that $20,000 becomes $40,000. It just keeps growing and growing and growing.
That's the power of interest.
Now, if it's 6% interest, it's going to take 12 years to double. If it's 36%, it's going to take about 2 years to double. It's just the matter of that interest, where people can get burned on this is maybe they allowed the default judgment to happen. $5,000 and that was 6 years ago. "Well, yeah, I think I need to pay this. I'll go pay him something less than $5,000." The collection lawyer goes, "Wait a minute. It's now $10,000." You go, "No, no, no. It can't be." Yeah, there's interest. That interest accrues. Be very careful about that.
If you're in a garnishment situation, here's the judgment and then they're garnishing your way just as you go forward in time, you want to make sure that you're considering what is the impact of the interest. Sometimes, people give ... We'll use our $5,000 example. Now, they've garnished me for $5,000, I go, "Good. I'm done." Then, 4 years later, I get a nasty letter from the collection lawyer saying, "Hey, you owe us $2,000." Like, "What are you talking about? It was $5,000 judgment. You garnished $5,000." They go, "Yes, but you forgot about the interest." You just need to be careful with this.
Our next question is ... I think, actually it's our last question. Can I be garnished in a state other than where the judgment was entered?
I'll give you a typical example. Let's say that you're sued in Georgia. They meant the car wreck, it's for an old credit card when you live there, whatever it is. They get the $5,000 judgment against you. Now, you live in Alabama. Can they come here to Alabama to stick their hand out and say, "I want money from your bank account or your wages."
Well, they can. They have to go through a few steps first. Let's take that example. You're in Georgia and I don't know what the rules in Georgia are whether they can do wage garnishment, bank garnishment, assuming that they can. They get a judgment against you in Georgia, then they can garnish your wages in Georgia and hit your buttons. That's not valid here. They have to domesticate the judgment.
What they do is they say, "Hey. Alabama court, over here in Georgia, we have a judgment and now we're bringing that here for you in essence to bless it.", or to say, "Yes. This is now valid in Alabama." It's usually not a real in depth process. There are some defenses, some arguments you can make. Maybe you didn't get served over here. It gets a little complicated. Do you get and fight that over here in Georgia or do you fight it here in Alabama? Different strategies base on exactly what has happened.
The point is, if they get that judgment out of state, they can if they jump through the proper hoops, go through the procedures, they can garnish that here in Alabama. We see this sometimes for thousand dollar things. We've seen it for seven-figured judgments where they're coming after you from another state. I'll give you some quick thoughts.
If you're in that situation, I would definitely recommend you go figure out what happened in that other state. Because sometimes, people as soon as they get this letter or this memo from HR, and it says, "You're being garnished." "What? I've never been sued." Then, they find out it's something in Georgia and they call a Georgia guy, "Yeah, yeah, yeah. You were sued 6 years ago. We got a judgment against you." You're like, "I've never been sued in Georgia. I never got served with papers." You have to look at that to make sure it's a valid judgment. Assuming it's a valid judgment, then yes, they can take it from Georgia to Alabama, vice versa.
Those are the questions for today. By a way of summary, we talked about what is a deed in lieu, a foreclosure. Will a bankruptcy override a judgment on my credit report and which will hurt me or affect me the most? How long does soon I have to collect on a judgment? Do judgments double every 6 years or is it just the interest? Can they garnish in state other than where the judgment is located?
Hope that that's been helpful to you. If you will, just leave us a comment below or you go to our website, Alabama Consumer. If you're in Alabama, you can call us 205-879-2447. Ask to speak to Carolyn and she can definitely help you out. Also, if you just have a question, she can pass that along to me. In what we do, just so I can explain about calling Carolyn, when you call the firm or reception will answer, just ask for Carolyn. She does all of our phone work so we try to protect Carolyn from having to deal with court issues and drafting documents and things like that so that she is completely available for talking on the phone whether that's a potential client or an existing client. We have clients from 5 years ago that come back to us. Whatever the situation is, she's your first point of contact. Then, she'll set you up with a phone call or an in-person meeting with me if that's appropriate.
Just let us know if we can help you in anyway. I appreciate you watching this. 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.
Today is August 21st, 2015. Like we do pretty much every Friday around this time, we'll be answering some elder law and also some estate planning questions that have been submitted to us. Typically, the way people get questions to us is you can leave a comment below a video. We try to monitor those comments. You can go to our main Elder Law Estate Planning website called Alabama Elder Lawyer. If you're in Alabama or if this concerns somebody in Alabama, maybe an aged parent that you are trying to figure out a long-term care issues for, things like that, you can always give us a call: 205-879-2447.
Today, it's going to become a shorter webinar. This week, we only received three questions. If you have questions, definitely get those into us and we'll be happy to answer those.
The first question is: How does a will affect joint assets?
I think what is meant by this is, let's say, that I own a piece of property with my wife. It's in both of our names. My will says that, just imagine this is the case, everything goes to my daughter. What would happen with the house? Some people say, "Aha! See? The will says everything goes to his daughter, so that ends it." The problem with that is a will only has power, only controls over things that are in my name only.
A joint checking account with a child, with my brother, with a friend down the street, my will has nothing to do we have that. A piece of property that I own jointly with somebody, my will has no control over there. If we're talking about typical joint ownership where when one person dies, the other person gets it. Keep that critical concept of mine because we get calls all the time. people come up to me at church or other places and say, "Hey, you know, what's gonna happen here because the will says it goes to all four kids but, uh, one of the kids is a joint owner on all the financial accounts." Technically, that kid gets everything because a will only controls things that are my name only.
It certainly is appropriate and fine to do joint ownership, it's maybe not the best way to do estate planning. There can be a lot of problems with that. Typically, it's better to have a will, at least a revocable living trust so that you can clearly identify: I want this to go over here and this to go over there. Just remember, a will, only things in my name, and whenever we're talking about a trust, a will, it doesn't matter. The ownership is going to trump any type of estate planning.
I might assure this, I don't know if I did this in a video or maybe just in some live seminars in front of groups of folks, but there was, I'm going to say it's like maybe 85 years old. This is a year or two ago. He got remarried late in life but he told his kids, "Hey, don't worry. Everything is going you." I think he had maybe a $400,000 IRA and he dies like 2 months after he gets married. The kids go, "Okay. Hey, it's ours, all right?" The will says, "It goes to the four kids," and the now new widow says, "Wait a minute. His assets are mine." There is a $400,000 IRA.
Just assume that's all that there way. What he had written on the IRA as far as beneficiary as he said, "Per my will." That's meaningless. If it doesn't say who is going to go to, then the default rule is it goes to your spouse. You have all the wills, all the trust in the world, but if you don't have things properly titled as far as legal ownership, then the best will, the best trust, may end up doing you no good. I hope that that answers this question of: how does a will affect joint assets? Really it doesn't. Again, assuming we're talking about the typical joint thing like a house with your spouse. It says, "We both own it. If I die, then my wife gets that." There are some types of joint ownership where, literally, it's divided up but that's not very typical for us.
Our next question is: How does the VA pension help pay for an assisted living facility?
I think the context of this is if you are talking about putting a spouse or a parent into an assisted living facility, it's pretty expensive.
It could be $3,000, $4,000, $5,000 a month, even more than that. How do you pay for that? You may have heard about something called the VA pension. It's also called VA Aid and Attendance. The same thing. That is a benefit for certain types of veterans or widows of veterans. For a married veteran, it's about $25,000 a year tax free. It's a pretty remarkable benefit because you're thinking, "Okay. That's two grand a month. That can really help me pay for an assisted living." A window is about $1,000 a month and a single veteran, you're talking around $20,000 a year.
Let's say that it's $5,000 a month and we have income of $3,000 a month. We're short. We got $5,000, we got income of 3, we still are short $2000 a month. Let's say it's a widow, if we can get the VA Aid and Attendance, that's an extra $1,000. Now, we're only going in the hole $1,000 a month. This can really be vital when you think about a married veteran and maybe, let's say, they've got $30,000. That's all the money they have. They make $2,000 a month and the assisted living is 4, so were $2,000 in the hole. We only stayed there 15 months. That $30,000 is just going to be gone a little over a year. If we could get the VA Aid and Attendance, there's that $2,000. How long can we stay there? I understand prices go up and things of that nature but using the numbers that I've used, you could say, they're indefinitely.
Real quick summary, three requirements for the VA pension. There's a military requirement so you have to be a war time veteran. That's active duty, just one day, World War 2, Korea, Vietnam, the Gulf War, which the Gulf War has been continuous since 1990, and then an honorable discharge. That's the military requirement. Second requirement, we look at health or disability.
Do we need help?
Now, if we're going into a true assisted living as opposed to independent living, because when we go for an assisted living it's because we need help. We need help bathing, we need help getting dressed, we need help getting up and down, out of a chair, maybe we're a fall-risk. There's something we need help with because, otherwise, we would go into independent living, which is it may still be in a facility but we live there independently.
That's one level, assisted living is another, and then nursing home is the highest level. Definitely, check this out, military requirement, disability requirement, and then financial. We look at income and we look at assets. That can get a little bit complicated. If nothing else, I want to put this in your mind and know that, "Hey, this is something I wanna think about if I have a loved one already in an assisted living or I can foresee that they will be going to an assisted living."
Our last question and we haven't had one in a while on special needs trust but it says, "Does money in a special needs trust get paid back to the government?"
It's a great question.
Let's define some terms.
A trust is just like a container or a box. I usually have a little treasure chest here but I'm actually in my home office right now. If you can picture it like a little box here and we put stuff in it. What do we put in? We might put in money, we might put in a house, stocks, investment, whatever it may be. What do we mean by special needs. It's also called supplemental needs.
Here's the basic idea. If I am getting government [inaudible 00:10:26] benefits. [It's maybe 00:10:28] I'm on Medicaid, maybe I'm on SSI. We're not talking about SSDI, the Social Security Disability Insurance, that's because I've worked and I paid into the system and now I'm disabled. We're not talking about that. Maybe I've never worked. Maybe I was born with a disability and so I don't have any income that I've paid into the government. Then I can get this thing called SSI, Supplemental Security Income. That is means-tested, which just means they look at my assets and they look at my income also.
When we're talking about a special needs, supplemental needs trust, we mean we're putting money into this box, into this trust, to benefit me but I don't want to lose my government benefits. I'm not getting into all the details but let's just say that
the test is if I had more than $2,000 in assets but I want to put $100,000 into this trust, how does that work? The government says, "Okay. We'll let you put it into this trust as long as that money is going to the person that needs help in a certain way, so it's not to replace your Medicaid or other government benefits. It's to supplement them."
What happens, I'm getting all this money from Medicaid or from SSI. Do I have to pay that back? It depends. When we look at that trust that we've created and money goes into it, we say, "All right. That money that went into? Where did that come from? If it was my money, I was entitled to it and I put my own money in there, then yes, it's gonna have to be paid back, which makes sense because that was my money and I would have been disqualified if it was sitting in my wallet or my bank account." The government says, "Okay. Look, John. You can put that into a trust and we won't count that against you but you know what? When you die, we're going to have our hand out saying, 'We want to be paid back.'" That's fair.
We got the trust, we got money in it, what if that money came from a parent or somebody else? In other words, not from me. That was their money, so it makes sense when that goes into the special needs trust, again assuming we're following all the rules and there are exceptions and all of that types of but just a general big picture, somebody else's money goes into the trust. When I die, that money does not have to go back to the government because it was never my money in the first place. It wasn't a lawsuit that I filed that I'm getting the money or it wasn't just I happen to have $200,000 in the bank and I become disabled and I get on government benefits.
If I'm going to shield that money by putting it in a special needs trust to supplement my needs, then the government gets it back. If it was never my money and I've got some, maybe it's a family member, whoever it is who's putting money into this trust, then the government doesn't get that money back. Again, assuming I follow all the rules. It can get a little complicated with special needs trust and sometimes you'll hear him call first party trust or a third party. Typically, what people mean by that is first party is me, so it's my money.
The most common scenario is, it's very sad when this happens, but maybe there's a young person that's involved, just a horrible wreck and they're in a nursing home afterwards or they'll never work again. They're getting government benefits but then it comes a time to settle that lawsuit against the trucking company or whoever injured them, and its $1 million. That's going to kick them off the government benefits. Sometimes we're okay with that. We say, "You know what? That's better to do it that way." If we don't want to lose those government benefits, then we need to make sure that that's going into the right type of trust to protect it.
I hope that these have been helpful. Again, just a reminder, we just covered as many as special needs trust get paid back to the government? It depends on what kind of trust it is. How does a will affect joint assets? It really doesn't because remember a will is only things in my name. How does a VA pension help pay for assisted living? It's really designed to cover that gap. Here's the cost. Here's our income. We're short, money, that's when that VA pension can really be helpful. I hope that this video has been helpful to you. Feel free to leave us a comment or ask any questions that you have. Again, you can do that below this video, you can do it on our website Alabama Elder Lawyer, or you can give us a call, 205-879-2447. Definitely, send us more questions and we will see you next week.
Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
Well, hello. My name is John Watts and I want to welcome you to our video.
This will be questions that have been submitted to us related to consumer issues. My name is John Watts, I am a Consumer Protection attorney located in Alabama. We try to do these every Friday. Today is Aug. The 14th, so if you would like to have your questions answered next week on the 21st, you can either put it as a comment below this video or you can go to out main consumer website, alabamaconsumer.com and leave us a question there. Or, you can even call us 205-879-2447. Ask to speak to Caroline and let her know you have a question that you would like to be answered.
So, we've got about five questions and the first one is: What do I do if Nation Star is showing up on my credit report but I don't have a mortgage in my name. It's in my spouse's name only.
So, this is something that we see quite often and it's when a mortgage company, specifically this is Nation Star, this happens with other companies as well, where they will get a loan and they will start collecting against you.
But the problem is the loan is not in your name. So, I'll use myself as an example. So, if my wife is the only one on the note and to make sure we're clear on the terms, the note is the debt and then that is tied to the dirt, or the property, by the mortgage. Now, we say, "I need to make my mortgage payment." If we were being technically correct, we would say, "I need to make my note payment."
But let's assume that only my wife is on the note. I'm not on the note at all. But suddenly on my credit report, Nation Star is reporting. It may be their collection letters from Nation Star saying, "Hey, John. You owe this debt." But you see, I don't owe the debt.
So what do I do?
Well, normally when a company like Nation Star gets the debt, let's represent it with this piece of paper, the question is: was that loan in default when Nation Star first touched it. The answer is almost always yes. Well, that's true that Nation Star is a debt collector and they're subject to the FDCPA, Fair Debt Collection Practices Act. So, what does that law provide? What does it give to you? Well, it tells debt collectors like Nation Star, "You better not lie. You better not do anything unfair or harassing."
Well, let's think about that. If I'm not even on the note and I don't owe any money, then if Nation Star is saying I owe them money, that's a lie. That's unfair.
Certainly, the note, the contract does not say, "Oh by the way, you can report this or collect against people who don't owe the debt." Of course it doesn't say that. Is that harassing? Well, sure it is. To say to somebody who owes nothing to say to them, you owe this money, I'm going to destroy your credit report, I'm going to send you harassing letters, I'm going to make harassing phone calls. Well, I don't know how else you would describe it.
So, what's the solution?
There's a couple of ways that you could do it. One, you can dispute through the credit bureaus. Because a lot of times, a company like Nation Star won't remove this from your credit report, but if you go directly to the credit bureaus - Equifax, Experian, [inaudible 00:03:39] Genius - sometimes they will, even if Nation Star doesn't want them to. Although, usually they'll do whatever Nation Star will tell them to.
The other approach is to say, "You know, we're just going to sue Nation Star under the FDCPA," because the prohibits false credit reporting, prohibits false debt collection and harassing unfair - all those things that when you're collecting against somebody that doesn't owe anything. I don't know how else you would describe it other than to say it's harassing, it's unfair, it's deceptive.
So, that is usually the best approach because when you sue these companies like a Nation Star, there's plenty of others that do this as well but our question is on Nation Star, they tend to suddenly go, "Wait, wait, wait, wait. We'll fix this problem. We'll leave you alone. We'll take care of your credit reporting and now how much do we need to pay you?" But if you just call them, if you just write them letters, a lot of times they're just like, "No. That's not gonna do it. We're not gonna make a change."
But when you sue them, and they get that lawsuit in their hands, suddenly now they're very interested to at least try to make things right and the question is: will they pay the right amount of money?
Because this is illegal what they're doing and there's a price that has to be paid for that illegal conduct. So, if you're dealing with Nation Star, Aquan, Celine, SLS, Bank of America, whoever the company is and they are reporting on your credit report and they're coming after you for a loan that you're not even on, then you need to take some very serious and usually immediate action to make sure that that gets fixed now, but also in the future that company will remember, "Oh yeah, don't do false credit reporting on the spouse that doesn't owe anything!" So that's usually the right solution.
Okay, our next question is: is it illegal to garnish a person's paycheck without first notifying that person that they owe that money?
So, a couple of things about that question. I'm not 100% clear on but I think what the person is asking is should I be notified or should I be served with a lawsuit before there can be a garnishment and the answer to that is yes. You have to be served before a judgement is valid.
Now, if you were served and let's say there's a judgement in 2010 and now all this time goes by and it's 2015 and now suddenly you get garnished. You have to be told here in 2015 that, "Hey. We're about to garnish you." Well, it's a little unclear. I think technically you should be. A lot of times though you may have moved and they definitely notify your employer before they garnish you and that's usually how you find out. You get a memo or a phone call from HR saying, "Hey, look. We've got this garnishment notice in."
So, the thing we look at, and we get a lot of calls about this, were you served? If you were served and you just didn't show up or you lost a trail, then, you know, there's consequences to that and they can garnish your wages as long as they follow the laws on garnishment. But if you were never served, now that's a completely different matter.
There doesn't need to be a garnishment if you were never served and we have other videos about what's being served. So, sometimes people get upset because again, they have the judgment way back here, five, six, seven years goes by and that may double that judgment just with interest and now suddenly, this collector or collection law firm shows up and they're want to garnish your wages.
That's a problem.
It's a real challenge for folks and so, you start looking at:
Can I settle this?
What about bankruptcy?
Very extreme option, usually not appropriate, but occasionally it is appropriate. You know, what can I do? A lot of times with settlements, the way to try to go may be you can do a monthly payment to them, maybe you can get your hands on a lump sum and you can settle it that way. But you definitely need to figure out what are your options if you are in that situation.
Okay. Next question is: what if I pay a medical bill but then a debt collector like Tri-State Adjustments - that's a debt collector out of Wisconsin, I believe - trashed my credit report. What do I do then?
Well, so let's set the stage. You have medical treatment and then you pay that bill and after you pay the bill, this debt collector appears and there's all these different kinds of types of medical debt collection companies. Tri-State's just one that - they happen to deal with St. Vincent's in Birmingham and surrounding areas and they have other accounts as well.
What do you do?
Well, let's kind of walk through that. So, I incurred the bill, so I owed the debt. But then I pay the debt and after I pay the debt, this debt collector, Tri-State in this situation, pops up. Well, when they pop up, do I owe the debt? Well, no remember, I incurred the debt, I paid it.
So, what are they collecting?
Well, they're collecting nothing and what happens is sometimes they don't communicate very well with the hospital or the medical provider and so Tri-State says, "Wait a minute, we didn't know that you had paid it!" Okay, I paid it. Now you know. But what we see is: have the bill, pay it, Tri-State appears, all right I already paid it, and then they put it on your credit report as a collection account.
I mean, isn't that amazing that you've already paid the bill before Tri-State gets the bill, it's already been paid, and they go, "Ah, you know what? We're gonna stick it on your credit report." Now, maybe they'll show it as being a 0 balance that has been paid, but it's false! That's just wrong to put a paid bill on somebody's credit report as a collection account when it was paid before the collector even touched it.
So, we go through the FDCPA, Fair Debt Collection Practices Act, is it false? Absolutely. It's a complete lie. Is it unfair? Yeah. I mean, can a collector just go along and go, "Oh, well you know 5 years ago you paid this bill, so we're going to stick it on your credit report." But what's the difference between that and five months ago or five weeks ago?
If it's paid before it gets to the collector, the collector has no business putting that on your credit report. It's an absolute lie. So, is it a lie? Yes. Is it unfair? Yeah.
Take our mortgage example.
Every month you make your mortgage or note payment on your house and then a collector comes along and says, "We're going to report you every single month. Now, we'll show it as being paid, but we're going to show it as a collection account." And you're like, "I've never been late! That is so unfair." That's what these medical collection agencies do.
So, is it a lie? Is it unfair? Is it harassing? Yeah! I mean, here's the purpose of this. We all know you have medical procedure. It's a nightmare getting the billing straight. Do you get double billed? Do they forget to bill your insurance? Do they forget X, X, X, etc... Sometimes medical providers wait two years before they send a bill. Well, that's not my fault they waited two years to send me a bill and so it's very confusing and all of the sudden you get this letter or they show up on your credit report from Tri-State and you're like, "What is this?"
But you know what? If you realize that Tri-State always credit reports. If they have created this impression in the marketplace that, “you know what, you get a letter from us at Tri-State, we're going to be on your credit report.” Then you might go, "You know, I think I've paid this but I am not taking a chance. I'll go ahead and pay Tri-State because it's only 50 bucks." Right? It's a 100 bucks.
Well, that's what they're trying to do in my opinon is create this impression in the marketplace that, you know what? We will credit report. We will come after you. So, that explains why they got the bill, they paid it, and then it goes to Tri-State. They'll still be on your credit report because they want to create that impression in the market place. This is what these medical debt collectors do .That, you know what? Don't mess with us because we will come after you on your credit report.
Now, they would just absolutely disagree with this and say, "We absolutely don't do that. If we know a debt's been paid before we get it, we would never put it on a credit report." Well, then, I would ask them this simple question because we have a case just like this where we told them we'd paid and they go, "Oh, okay, okay. We won't bother you" and then they put it on our credit report after that.
They don't put that it's disputed. Obviously, we dispute it being with a debt collector and it shouldn't be on there in the first place. So what's the explanation? Well, the typical industry explanation is it's all just an accident. It's a simple mistake.
We weren't really trying to collect anything.
Well, that's something they can prove in front of a jury and so if you deal with medical collection, you've got to check that stuff very quickly because so many times, either you never got the bill in the first place, it just goes straight to a collector. Well, how is it late if you never had a bill? Or, you got the pill, you paid it and then it goes to a collector or then 6 months later a collector pops up on your credit report.
You've got to monitor this very carefully with medical bills and if you've got a medical debt collector out there that's violating the law, then look at your options for suing them under the Fair Debt Collection Practices Act, under Alabama state law. Because once they realize that... And this is what we said in a closing argument a few years ago in federal court.
When these debt collectors realize that there will be full and fair compensation for Alabama consumers. So, you break the law, the FDCPA, and jury awards a full and fair amount of compensation. That sends a message to these debt collectors and says, "Woah! You know what? We need to be very careful in Alabama because if we break the law, people will be compensated."
Now, they don't like that. They want to be able to break the law for 100 people and 1 person will sue and they will say, "Well, you should barely get any money." Well, why? We want full, fair compensation for somebody and when debt collectors, whether it's medical collectors, credit card collectors, it doesn't matter what kind of collector, when they know there will be full and fair compensation in Alabama courts, they go, "Woah, let's be careful in Alabama." Now, we may be reckless in Georgia or Mississippi or somewhere else, but let's not do this in Alabama because there will be a heavy price to be paid.
Okay. So our next question is: If Portfolio Recovery is collecting a debt that I don't owe, how do I stop them collecting when I've been dealing with collector after collector on the same bogus debt?
Now, you can substitute any debt collector and Portfolio Recovery is just a big one. We've sued them dozens and dozens of times in Alabama Federal Court. So, what do you do? You get this letter and it says, "You owe 1,000 dollars on some debt." You go, "I never owed that debt and I told this collector and that collector and this other collector and this other collector that I don't owe this debt and I even told the original creditor" or these collectors told the original creditor you don't owe the debt. Maybe it's identity theft, maybe you paid it off, whatever it is, but it just keeps coming over and over and over.
If you have kids, you've probably been to Chuck E. Cheese and there's that game, I think it's called Whack-A-Mole. You get that little stick and there are all these little holes there and this mole comes out and you whack it. You're like, "Ahh! I won!" Oh wait, it pops over here so you whack that one. Oh, it pops up over here.
That's what these debt collectors are like.
They'll come after you for bogus debt and you go, "Hey! Leave me alone! Stop." They go, "Well, send me this, send me that." You send them all this stuff and they go, "Okay" and they just send it to the next one or they send it back to the original creditor and say, "Hey consumer says it's bogus." Then they send it out to another debt collector.
Now, you'd think a debt collector gets an account, they'd say to the original creditor, "Hey, has anybody said this is not a valid account?"
They don't do that.
It's kind of like see no evil, hear no evil. I don't want to know. That's how the debt collectors are. So, when they get it they want to be able to say, "Well, I thought it was a legitimate debt." Well, did you ask?
Did you go back to the original creditor and say, "You know, it's sort of funny this has been through 13 debt collectors. Is there a problem with the account?" Particularly when you're collecting against someone who has perfect credit and they know. They pull credit reports. They go, "Huh, that's strange. This account has been to all these different debt collectors. The guy we're collecting has never been late in his life. Oh, you know what? I think it's a valid debt!" That's their mentality.
So what do you do about that? You can write them a letter. Maybe it will stop. Of course, it may be more of that Whack-A-Mole where it pops up somewhere else. They'll just sell it or transfer it to somebody else. So, you can write them, call them.
You know, sometimes the best solution is you sue a company like Portfolio. You say, "Hey guys. I don't owe this debt. You know I don't owe this debt and leave me alone." Because when you sue them, that tends to get their attention. They go, "Oh, okay. Let's see. We don't want to collect this debt anymore. We want to get this off your credit report and we want to just bury this in the basement of our building and it will never come back to life."
You see, if you sue them they know now, particularly since you sued them - but really they knew before - but they know now you don't owe this debt and then they transfer is to someone else. Well, we sue Portfolio again and sue the new debt collector again. Because it's illegal to collect a debt you do not owe. You know, this is what in law we call strict liability. It's just, “are you collecting a debt I do not owe?” If the answer is yes, then you are strictly liable for that.
Now, the debt collectors have some legal arguments, some defenses they try to prove. "Oh, it was a complete accident. We have all these elaborate procedures in place to make sure this never happens." Okay, well if they can properly prove that, they might not owe any money. Very difficult for them to prove it because they intentionally do not have good procedures in place so that they have this sort of alibi, if you will. So, again it's like see no evil, hear no evil so we can collect against anybody and when they complain about it, we go, "Oh, wait, wait, wait. I'm totally innocent."
I've been doing this a long time and I've never seen a situation where they truly can prove that. So, again, every situation is different, check with a lawyer, but it may be your best interest is to go ahead and sue Portfolio just to finally bring this thing to a halt.
All right, I think we've got one more. I filed bankruptcy and either could not or did not reaffirm my mortgage. Will I get kicked out? Do I still owe the debt?
Alright, so here's the deal.
You have a mortgage, you file bankruptcy and I assume they mean chapter 7 bankruptcy, and once you get to the end of that bankruptcy, it wipes out all your debt. There's a few exceptions but mortgages, notes, loans, and debts would be wiped out.
So, there's something called reaffirmation. It means to affirm or to agree and the ” re” means to do it again. So, it's an agreement again that you are responsible for this debt. So even that you've got this debt, could be credit card, car loan, mortgage loan, even thought it would just be torn up, if you reaffirm it, then after you bankruptcy you're still on the hook for that loan. Now, we're not getting into why you should or shouldn't do that, but sometimes the consumer doesn't do it. Sometimes the mortgage company says, "Oh no. We won't reaffirm it."
So where does that leave you?
Well, to some extend it leaves you in this kind of no man's land because once you've got that debt, you file bankruptcy, you get to the discharge, here's what happens to that debt. It just gets torn up. It doesn't exist anymore. They can never come after you for that debt and if they do they violate the law and you sue them.
So what happens to the house because you don't owe anymore money on your house? Does that mean you get your house for free? No and we get these calls. Somebody will get these calls and go, "Hey! I didn't reaffirm on a half million dollar house so I want my house for free." No. You don't get it for free.
That mortgage company, even though the debt has been torn up, so... We've got the debt, we've got the land, okay? The mortgage ties the debt to the dirt.
So, the debt goes away but that mortgage, that security interest in the property is still there. So they can come and get the property. How do they do that? They foreclose. So, what happens as a practical matter?
Normally, if you make your payments - this can make your head hurt - if you make your payments on a debt you do not owe, think about that for second because remember, it's just been shredded. You don't owe it anymore. But if you make payments on that, they won't foreclose.
Normally, they won't foreclose.
So, what happens a year goes by, two years go by, what's it being reported on your credit report? Well, it won't be reported other than the debt has been discharged because you don't owe a debt. So, they won't report every month that you're making payments on this debt that has been shredded. It's been discharged.
So, can they foreclose? Well again, normally, if you make your payments they're not going to foreclose. Well, can you get loss mitigation? Yeah, you can. Maybe into a loan...
We're getting into all of the exceptions to the exceptions. Definitely get with your bankruptcy lawyer about this and a lot of times bankruptcy lawyers will say, "Hey, John. Will you talk with this client because we need somebody to explain to them what situation they're in?"
Because maybe it's years have gone by, you've been making all your payments, now you want to sell your house and buy a new one. Well, how do you do that? How do you get a payout on the loan. It gets very complicated.
So, again. I'm not saying whether you should reaffirm, should not reaffirm. There's advantages and disadvantages but hopefully that answers the question about will I get kicked out of my house. Well, only if the foreclose and they normally will not foreclose if you're making your payments.
So, hope that these answers to the questions have been helpful. Certainly would be glad to put your question on our next show. You can just put a comment below this video or go to Alabama Consumer. Or, you can click here to Contact Us. You can ask us a question and just let us know. Generally people contacting us through there want us to call them and they're asking a question. They're saying, "I live in Alabama and I need some help here!" But if all you want is it answered on the webinar, you can certainly tell us that and even call us: 205-879-2447, ask for Carolyn.
And if you do live in Alabama and you want to speak with us directly, not just have a question answered online, want to speak with us directly and set up a consultation, you can do that as well through Alabama Consumer or calling 205-879-2447. So, we appreciate your questions, I'll look forward to chatting again with you next week. Okay. Bye-bye.
Welcome to our Q&A on elder law issues. The entire video is above, and the transcript is below.
I hope you enjoy!
Hello and welcome to our webinar. This is will be on elder law issues. My name is John Watts I'm an attorney in Alabama. I help families all across the state deal with Medicaid, Alabama Medicaid, VA pension, and other elder law issues. Generally when we're talking about elder law issues we're talking about, how do we pay for long term care without losing everything that we own.
Mom or dad going to the nursing home, do we lose everything? Do we have to sell the house? Or can we preserve some of that? Can we plan ahead of time so that we can preserve?
We've got about five questions we're going to answer today, today is August 14th, we'll do this again on the 21st. If you have questions feel free to put a comment below, you can go to our elder law site it's called, Alabama Elder Lawyer or you can even call us 205-879-2447 and ask to speak to Carolyn and let her know what's your question is.
I believe all of our questions have to do with Medicaid today, I'm sure next week we'll have some on the VA pension.
First one is, my mom wants to give me money to buy a house but if she needs a nursing home within five years Medicaid will take my house. Is doesn't seem fair as this is really an advanced on my inheritance?
Couple issues, let's talk first of all about this five-year because this question does reference to five-year. If we apply for Medicaid right now August 2015 and we qualify the Medicaid looks back in time five years, what are they looking for?
They're looking for any type of "gift". What are they do with a find a gift? Then here we are in August 2015, they've looked back five years, they then will penalize as going forward and say, "Hey, you had to pay for your own nursing home care." Does a Medicaid picks up the cost of the nursing home?
The penalty is now you got to pay it all yourself. Now, even when Medicaid pays it generally not always, but generally. Our income is going to be required whoever is actually in the nursing home. They'll have to use their own income, and then Medicaid pays that different. We have a $1000/month in income, nursing home six grand and Medicaid is going to be paying five grand a month.
We apply now and we qualify, they looked back see a gift, then they're going to penalize us going forward. The question is, if my mom gives me money to buy a house will Medicaid take the house? Let's pick a number let's say it's $58,000 that she gives you to buy a house. She qualifies and she applies right now, and in our last webinar we talked I believe a good bit about that. When do you apply? When is it appropriate? When is it smart to apply?
They looked back in five years and see that $58,000. What's the penalty going forward? It's that amount $58,000 divided by $5800, and that's the idea of the concept is that's the cost of the nursing home in Alabama. That would be 10 if our math is right. Ten months going forward your mother would have to pay for her own nursing home care even though she's really "broke" because she qualifies for Medicaid.
Do they take your house? No, they don't take your house but they're going to penalize your mother and make her pay for the next 10 months.
Now, if there other gifts in that five-year period then that penalty would be long. One way to get around that penalty is that the gift is return so you could always give the money back to your mom. Now if you don't have the money, are they going to take your house? No, they'll just penalize your mother.
It's not illegal to give away assets in the previous five years from when you need Medicaid, it just means there's going to be a penalty going forward.
What's the lesson?
The lesson is anytime somebody who even remotely could need a nursing home. Anytime they're giving away assets, it could be money, it could be a house, it could be a car, a boat, or whatever it is. They need to have a plan. I'm giving this away but what happens if I need the nursing home? What happens if I need to get a Medicaid? Do I have enough money to pay for this? Have I made the arrangements, maybe I have a long term care insurance, maybe I have a Medicaid Compliant Annuity, what is my plan? Have I set up a trust that will work for me?
We see the family getting trouble when they don't have a plan, because we don't always have the money to give back and if it's been used by a house, maybe you can get a loan on house, maybe you can't, but they're maybe no money to get to mom. That's going to make it really painful, which is going to make privately paying for a nursing home difficult even though she qualifies for Medicaid, which means their assets have been reduced significantly.
You got to make sure you have a plan, if you find yourself in this position like the person who wrote this question then you've just got to sit down with the lawyer who understands Medicaid in your state and say, "Okay, what do we do now?" We can usually fix things. I wish people will come to me ahead of time, but usually they call my firm when, "Mom is in the nursing now. What do we do?" Or they wait 'til they run out of money. Now what do we do?
It's better if you can have time to plan it but even if you don't, even if it's a crisis situation. Usually we could still make that work.
Hopefully that answers that question.
Our next question is, my mom is in nursing home and needs Medicaid, six years ago she set up some type of trust and is receiving dividends and interests from the trust investment, should we turn those off? Does she have to report this to Medicaid?
I assume by this the person is asking about turning off income or the trust itself.
It's six years, so that's good, that's beyond that five-year point but that's all you're going to do is good if it's the right type of trust. If it's a revocable trust and let me get my trust here, treasure chest, a revocable trust, the lit is open. Six years ago to put all these investments in.
Medicaid says, this is still her money. She has to used all of that. That's what's called an available resource, but if it's a right type of Medicaid Compliant Trust, particular type of irrevocable trust then the lit is shut and that is not her money anymore.
Since that's beyond the five years Medicaid would not know about that. Here's the problem, the fact that this trust is giving her income or dividends then at a minimum Medicaid is going to say, She at least has that as income and she's going to continue to use that. You can't just turn that off when she needs Medicaid because either it's her income or it's not.
If it's her income then we've got to count it just like Social Security, a retirement, pension type income, annuities, whatever the situation may be that would be counted. Sometimes what Medicaid does is I say, "Well, wait a minute, if she can get this income then we think she really still has control over these assets."
Now, we have to look very carefully at the trust agreement, what is it say, here the trustees, was it allow? Generally when we do these types of trust we do not have any income going back to mom or dad, because my concern is whether it's right or wrong for Medicaid to do this if they see any income coming, then they're going to try to reach in to that trust and grab everything and say, "Hey mom, that's all your money."
The six years is good but we have to know what type of trust and I think at a minimum we're going to have to continue to count that income unless there's a legitimate reason not to.
Our next question and this is a very common question, as a matter of fact that church I was just speaking with the CPA about this very issue. CPA said I can give away 14,000 a year to my kids and my grand kids or Medicaid follow the tax laws on this. Because the CPA, very legitimately, it's completely accurate things.
Look, you give away a certain amount of money to a person this year it's 14,000 and you don't pay any taxes on that. What they mean is you don't pay any gift taxes on that. You can just do that and there's no problem and that's true. What the CPA said is absolutely correct.
The question comes up, let's say that we're giving away 14,000 a year to three kids less what 52,000 a year, 42,000, whatever the math is on that I guess it'd be 42,000. We're giving away that much every year, we've been doing that for five years. What's that like, $210,000 or whatever it is.
We've been doing that and then we apply for Medicaid and we qualified, they're going to look back five years and they're going to see all that money giving away. Family is really struggle with this and I understand because it gets confusing they go, "Wait a minute, the Federal Government said I can give away 14,000 a year." It's true under tax law.
The question was, will Medicaid follow the tax laws? Medicaid doesn't really follow tax laws, the tax laws don't apply to Medicaid. Medicaid is going to say, "That's a gift." You qualified now. You look back five years. We see all these $200,000 worth of gifts and $14,000 increments they're going to say, "That's a gift," and we're going to take that, we're going to divide it by 58,000 and whatever that math is that's going to be the amount we're going to be penalized.
It can be pretty significant and it's not that Medicaid is wrong and the IRS is right, or the Medicaid is right and the IRS is wrong they're both right. It's just different rules. They were the almost be like saying, when you're playing a sports game can you grab the ball and run with it?
Usually in football you can, but what about in basketball? That would be traveling, that would be a violation of the rules. Somebody goes, "Well which is right, is it football or ...?" It depends on which game are you playing.
If you're dealing with taxes then the IRS gives you the rules. If you're dealing with Medicaid, paying for a nursing home, longer term care, then you got to play by Medicaid's rules. If you grab the basketball and run down the core and dunk it, and the referee calls you a travelling, but in football that would have been okay. It doesn't matter about football you're playing basketball.
Have to know which rules you're following and this is why it's so critically important to make sure you have a team in place. If you're making transactions and transfers, and gifts, make sure you understand the consequences of those because you've got to know, am I dealing with taxes, am I dealing with Medicaid, am I dealing
with the VA pension, what am I dealing with?
I hope that that answers a question. It's fine to give away money and the tax code if you're following the code, but it has nothing to do with Alabama Medicaid.
Is a gift to a church or a charity considered a gift under the Medicaid's look back?
That's a five-year look back rule. Let me give you the technical answer, then we'll talk about practical answer. Technically, you applied today August 14th 2015 and you qualify for Medicaid, they're only back five years and say if there any gifts whoever it was made it. They're going to total all those gifts out divided by 5800 and the answer is, that's how many months your penalize going forward.
Technically, that's what they did. As a practical matter, if we're talking about your normal church contribution that I have not seen Medicaid try and say, "Well that's a gift and we're going to penalize you."
For 47 years you've been going to this one church, and the last 10 years you give $200 a week to church, $800 a month. Medicaid might look at your income if you have $1000/month in income I might say that didn't quite seem right. If you have $5000/month in income that's going to be different. Let's lower the number say it's $50 a week, $200 a month that's $24000 a year. They generally are not going to complain about that because you could show a pattern every month, give the same amount to church.
Now, what if you started getting sick and suddenly you go from $200 a month to $2000 a month and your son is the minister there. It just doesn't look right. It looks like what you're doing you say, "Let me get my money out of my hands into the church." How am I supposed to do that? But if it's just a normal you show this pattern every month, this is what I do, then normally you're going to be okay.
With charities it should be the same way. In my experience they're little less likely to catch any breaks on charities as opposed to church. Particularly if the donations are not regular type donation, or if you've got some connection with that charity. Your son runs this charity, your daughter is the chief fundraiser for some other charity and you suddenly start giving a lot of money to me. Medicaid is going to look at that and say, "What are you doing?" Because technically any gift you make the presumption is that was done to keep that money away from Medicaid.
If you do this not illegal as long as you tell Medicaid when you apply, it just means they're going to penalize you after they look back in time. Often a charitable
donation will be considered a gift, and sometimes it's very, very obvious. Somebody says, "We got $4 million, I'll give $500,000 to my college." That's a gift. You're not get anything exchange and just a warm feeling in your heart doesn't count as a fair exchange. Hopefully that answers that question.
Our last question is, we pay a caregiver for mother in cash and the caregiver helps mom with activities of daily living dressing and things like that. If we need Medicaid for nursing home, will this cash money be considered a gift when it was really to pay for her care?
In the last question I talked about just technical answer, practical answer. Technically speaking to pay a caregiver in Alabama and I think this is actually violates federal Law the way Alabama interprets this rule. Alabama says, you're going to have a written contract it's got to be for services that have been just rendered, so another we don't pay somebody now for something they did three years ago. It's got to be, you do the work, you get paid, you do the work, you get paid.
Then I say, a doctor has to sign off on that caregiving. Basically say, but for this caregiving person be in the nursing home. I don't think federal law puts that last requirement and I think Alabama has reached the little too far with that.
Understand the purpose.
What they're trying to do is say, look you can't just get rid of all your money and call it "caregiving" I get that. It's got to be legitimate. I'll give you a couple extreme examples.
There's some places where supposedly this is allowable not sure, but definitely not in Alabama but somebody is rocking a law and there you go, oh I'm going to need nursing home next month, and so right before that they take 500,000 other, $502,000 net worth and they pay it to their staff and they say, "I want a lifetime caregiving contract from you, where the rest of my life you will take care of me, you'll come visit me in the nursing home, you will give me love, affection, you'll call me on Saturday nights," whatever it is.
Oh well, no, that's the obvious thing that somebody is going there, is they're trying to give away this money but not count it as a gift because Medicaid looks back in time five years. What Medicaid says is, "No, no, no, no, you can't do that. You can't pay somebody now for some future services." You pay them for work they've actually done and not way back in time.
The question is we've been paying in cash, what's Medicaid going to do with that? If there's no caregiver contract, paying somebody in cash, talk to your accountant probably should be doing that, then it's very likely Medicaid is going to say, "That
was a gift."
Maybe you've got caregiving records, you keep in the log book, and Susie the caregiver or Billy the caregiver, here she comes in and they write down, well here's how your mom is doing, here's what I did. Maybe, you can show, "I'll take money out of the ATM," the next day they come, "I give them the money." Maybe you can do that. It's a difficult position. If we've already done that in the past we've got to deal with it and try to document that, so that Medicaid understands we're not playing any games here, this is legitimately for services rendered. That whole gift thing is exactly what it says a gift. It's not paying for services. If you buy a car, that's not a gift unless you're paying more than what the car is worth.
Paying a caregiver or a comfort keepers, visiting angels whoever it may be, that's not a gift. You've got to be able to document that. Now, going forward, my suggestion is based on family is coming to me particularly in a crisis situation is, don't do that, don't be paying people in cash and there's not written agreement. Now, you need a formal written agreement even though I think Alabama has gone too far with this, I think that it makes a lot of sense to get the doctor involved to say, "You know what, your father would have to go to a nursing home if your cousin Andrew didn't take care of him." Okay? The doctor says that.
If it's not true, don't ask the doctor to do it but if the doctor knows your father knows that he can't dress himself, can't get to the bathroom, or has dementia somebody is got to be there then that doctor she'll sign that document for you.
Do everything above board, make a very clear, so that Medicaid says, "Hey, what happen to this money?" Here it is, here's my contract, here is the hours that cousin worth, here's the rate we paid him, and that is $12 an hour, if we got comfort keepers that would be $17 an hour. They'll make the right higher than what the market rate is because you're just asking for trouble with that. If anything we like to make the right lower, be very conservative. Medicaid sees, "Okay, this is very, very legitimate."
I know today it was focused mainly on Medicaid, next week I think we'll have a mix of questions because we have backlog of questions we haven't finished up. Definitely let us know if you have a question you can put it in the comment below, you can go to Alabamaelderlawyer.com or 205-879-2447. If you live in Alabama and you're watching this, or you have family member in Alabama and you have questions about Elder Law, VA pension what's also known as VA Aid & Attendance, Alabama Medicaid, feel free to let us know.
I should mention this, we also will cover in this webinar we do every week general state planning question, it's not really our focus but to do elder law that's up here and the state planning is down here, so we have to understand the state planning but most of our questions, and most of our clients are more elder law based. Also, special needs trust, so may be you have a child that is disabled, you want to be able to give them money or leave them money to an inheritance. I kick them off government benefits or maybe I've been some terrible tragedy, there's a lawsuit, and the person receiving the money is on Medicaid or SSI and how do we do that without them losing their benefit. We'll talk about that as well.
If we can help you in any way just go to Alabama Elder Lawyer, or 205-879-2447. Thanks for watching and we'll see you next week.
Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
Hello, my name is John Watts. I want welcome you to our question and answer on consumer legal issues. Today is August the 7th, 2015. We've been a little bit late in doing these. It's been a few weeks since we did the last one. We're going to try and do these every Friday and we'll get the exact time down. If you have legal questions, consumer issues, maybe it's about debt collectors, credit reports, foreclosures, robo dial calls to your cell phone, whatever it may be, feel free to leave us a comment or you can go to our main consumer website, www.Alabamaconsumer.com. You can do the "Contact Us" and let us know what your question is.
I've got a list of them here.
The very first one is, "What do I do if I have paid a medical bill, but then after I pay it, it gets turned over to a collector?" Then, there's a follow-up about, "Then it ends up on my credit report."
First of all, if you paid the bill and then it goes to a collector that shouldn't be because there's nothing to go to the collector.
We don't send zero dollars to a debt collector. If it has gone to a collector you may get a letter in the mail, you may get a phone call. You say, "Wait a minute. Wait, wait, wait. I paid that MRI or that co-pay or whatever it may be. I've already paid it. I need you to go away. Don't call me again. Don't bother me again." If it's a legitimate, honorable debt collector they'll say, "Oh, I'm so sorry. We did not mean to collect the debt that's been paid," because that's illegal. Legitimate debt collectors don't do that. What do you do if the debt collector continues to write you a letter, continues to call you, or as the person asked the question that we're having, it gets put on their credit report by the collector? We look at first of all is this a consumer debt? When we look at the FDCPA, Fair Debt Collection Practices Act, we've got to have a consumer, not a business but a consumer. You have to have consumer debt, not a business debt and then a debt collector.
Here a medical bill that's going to be considered a consumer debt or personal debt. The FDCPA applies. A debt collector tries to collect a debt that you do not owe. That violates the FDCPA. Just the fact that they sent you a letter, they call you on the phone that violates the law. First time it happens, you probably say, "Hey, look. I don't owe this debt. Please leave me alone." If they continue to do it, you either say, "I'll just accept that they're doing this to me and they are ruining my credit, making my phone ring, sending me letters." I'm not a big fan of that. Or, the other option is you sue them because you've already told them, "Look, guys. Leave me alone. I've paid this debt." If they continue to come after you then obviously telling them that again what good is that going to do? You sue them in federal court.
Now, every situation is different. You've got to meet with a lawyer, find out in your particular situation does this make sense? Often, this is the best answer because then these guys will understand when they get a copy of that federal court lawsuit like, "Oh, okay." You're being serious when you say, "Leave me alone. I paid this debt. Do not collect this from me." When they get sued then they know that you mean business and then they leave you alone. Now, they also have to write you out a check. They violated the law and damaged you. That is typically our solution. It's amazing just how quickly when you sue these guys they will come and go, "Oh, oh, oh. We're sorry. We're sorry. Now, let's make it right." Okay. It never should have got to that point. Hey, if that's the way that they run their business where they will say, "I'm going to wait until I'm sued before I'll do the right thing," okay, we can handle that.
I had a judge tell me one time. He said, "Mr. Watts, that's why we build these big courthouses and they give me the black robes for when lawsuits are needed." We understand that sometimes this is what's needed.
Okay, our next question is what is a robocall?
If you've been watching the news you'll have noticed that the federal government has recently issued a new set of rules. It's actually incredibly long. We're going to do a whole webinar on this about the TCPA, Telephone Consumer Protection Act.
When is it allowable to use a robo dialer or an auto dialer, computer dialer to call your cell phone?
A robo dialer just means it's not a human being dialing in the numbers, but it's a computer doing them. When is that allowable? It's allowable if you've given permission to the company calling you or to a previous company. Here's what I mean by that. If you gave permission that's a whole different subject. We're not going to get into what constitutes permission or consent.
If you've given consent to say, Capital One, and then they transfer it to a debt collector, and now that debt collector is calling your cell phone and you gave consent to call your cell phone with an auto dialer, a computer dialer, then that's normally going to be okay. It'll be legal. Now, if you've revoked your consent and the new law makes it clear ... It's always been the law, but some companies and even some judges got confused on this. You can always revoke your consent, okay? If you say, "Yes, you may call me on my cell phone," later on you can say, "You know what? Don't call me on my cell phone anymore." If you gave consent, but then you revoked it or if you never gave it in the first place then those calls are illegal.
You can get actual damages or what is more likely is what are called statutory damages. Those are damages that even if you cannot prove or don't want to prove that you're actually harmed, you can still get $500 per call or up to $1,500 per call if it was a willful or intentional violation. Now, what's the point of those damages? It's to encourage these companies that just routinely break the law. They break it here, here, and here and all these people they're calling. This law says you know what? If you do that, $500 per call, maybe as much as $1,500 per call.
We've had clients that have received hundreds of calls. It's very motivating to these companies. They can't stand this law. They just go, "This is so unfair. We ought to be able to just blow up anybody's cell phone anytime we want." Sorry, you don't get to do that. You don't get to blow up hospital rooms, 911, cell phones. There are reasons why this law has been in place for years and years and years and years. There's nothing wrong with calling a cell phone if you manually dial it, or you can use a computer or a robo dialer. Yeah. When you get the phone call and it says, "Please hold for an important message," that's not a human being saying that line. It's okay to do that as long as you have consent. This law just says, "Look, make sure you have consent before you start using a computer to dial somebody's phone maybe once, four, five, ten times a day." It makes sense to me. Same thing with text messages. Don't send automated text messages unless you have permission to do that. Again, we'll go into this law in more detail maybe a couple weeks from now. I forget when we have that scheduled.
We're doing a national webinar for lawyers. That's a paid webinar where lawyers all over the country will be in that webinar where we talk about using this in the context of class actions. I'm talking about one for consumers we'll do this. There's obviously no charge for it. We put out all of our material free of charge. It's to let you know what your rights are and that you will know what action to take if you have a company that's violating this law.
Okay. Our next question is, "I have a prepaid cell phone and I'm getting robocalls. What's the law?" Then, the follow-up part of this is, "These are not calls for me. These are calls for the previous person that owned the phone."
It's been a huge battle.
The debt collection companies, the telemarketing companies, robo dialing companies what they want to say is, "If Joe Blow gave me his cell phone number in 2000 then I have permission to call that phone number apparently for all eternity," because they say, "The permission is the phone number and we don't care who has the phone now." Judges have looked at that and said, "Are you serious?" They go, "Oh, yeah, yeah, yeah. We're serious. This is what we believe the law is." No, it's not the law. The federal government came along and said, "Look. Tell you what we're going to do. If you call the wrong number you get one free call. That's it." What happens after that? After that, let's say I get a new phone number and I get this call and it's from some debt collector. I didn't give them my number. Somebody two years or five years ago did.
The first call is for free under this TCPA Telephone Consumer Protection Act, but second call, third call, fourth call, those all violate the law because I didn't give them permission to call my phone. Oh, my goodness. These people are just having a complete come apart about this. They're like, "This is so outrageous." What's outrageous is, "I have a cell phone. I bought the cell phone. I have the cell phone number and it's getting blown up for somebody else. It's my phone now." We've had cases before. Years and years ago we started doing these cases where we'd say, "You know what? You're calling the wrong number." They go, "No. We believe that you are Joe Blow and we're going to keep calling you." "Look, my name's not Joe Blow. Stop calling me." They go, "No, no, no, no. You're lying. We'll keep calling you because if you're not Joe Blow you'll tell us who Joe Blow ... " You're like, "I have no idea. I just got this cell phone." The law is very clear now they can't do that. What's the moral of this? Make sure before you blow up somebody's phone with a robo dialer that you've got the right person. When we've sued this was sometime in the maybe mid-2000s we sued a company. The lawyer called me and was crying, "This is so outrageous, so unfair. John, we had permission years ago to call your client's cell phone." I'm like, "I don't care. You didn't have permission to call my client's cell phone. Maybe somebody down the road you did." I said, "Let me ask you this. If I gave you a key to my house and said come over anytime you want. You just walk right in. You've got the key to my house. We've got a guest room. You can use it anytime you want. Now, would you have permission to come into my house?" He's like, "Of course. You gave me permission."I said, "What if I sold my house two years ago? You walked up to the door, you stuck the key in, say that they hadn't changed the key. You unlock it and you walk in. Is that trespassing?" "That's different, John." "No, it's not different. It's the same thing. That would be trespassing." You say, "I had permission." "Yeah, but the ownership is changed. You had permission to call area code 205-555-5555, but you don't have it anymore because now somebody else has that phone number." Again, this is not rocket science. Stop blowing up people's cell phones with robo dialers unless you know you're calling the right number. They can figure this out. They go, "Oh, we can't figure it out. There's no way to know. There's no central database and people turn in their number and it gets recycled."
You know what? That's a great point. Then stop using a robo dialer. If it's so unpredictable, you have no way of knowing if you're calling the right person, then dial the way that legally you're allowed to dial. Okay? Just don't go in people's houses with old keys and then when you get shot complain about it. Like, "Five years ago I had permission to come in here." It doesn't matter. Anyway, hope that helps. If you have a prepaid cell phone and you're getting these calls you're like, "Who in the world is this?" They're these robocalls, prerecorded message, auto dial calls, computer dial calls, then definitely check out your rights and your options on that.
Now, our next question is, "I got a collection letter from a lawyer. I disputed it and got no response and then I got sued."
Pretty common situation.
Let me give you the classic example. You have a debt buyer that's called Cach, C-a-c-h. They basically have these collection law firms around the nation. I don't know all the inner workings of it, but it seems like these collection law firms just basically rent their letterhead. Instead of you getting a letter from Cach this debt buyer, it's like, "Oh, my goodness. This collection lawyer from Arizona or Chicago or Louisville, Kentucky is writing." You write them a letter. You have 30 days. You can actually do it after that, but to be strict about the rules you have at least the 30 day period from when you first got that letter to write and go, "Look, I dispute this debt."
If you dispute that debt then they have to give you what's sometimes called validation or verification. Really, the correct term is validation of that debt if they want to continue to collect. Now, you can write a collection agency, a collection lawyer and say, "Look, I dispute owing this debt. Give me proof." They don't have to do anything, but they better not collect against you if they do nothing. In this situation we see this over and over. You get the collection letter from the collection law firm, say from Louisville. You write them a letter. Go, "I dispute this debt. I don't know who in the world you are. Who is Cach? Send me proof." They do nothing. Then three months later they sue you.
That violates the Fair Debt Collection Practices Act, the FDCPA. Again, if you dispute it and particularly ask for validation, they don't have to do anything, but if they do nothing they can't collect against you. If they want to collect they better validate that debt. They better address your dispute. When that happens that's a violation of law, not only by the law firm, but more importantly by the debt buyer, Cach, in this situation. It could be Midland Funding, LVNV, Portfolio, whoever it may be, if they had the debt originally when that first collection law firm letter went to you, and then they're the ones that sue you then they've got a problem. That's something that normally the best way to address it is in a federal court lawsuit against that debt buyer, that debt collector.
Okay, let's see here. "I read online that the FDCPA, the Fair Debt Collection Practices Act does not apply to a mortgage company. Is that true?"
Let's take this example. I just go get a loan from Wells Fargo yesterday. My first payment is due in 30 days. Is Wells Fargo a debt collector? No, absolutely not a debt collector. What if they transfer that loan in a week? Remember, my first payment is not due for 30 days. They transfer that loan to Ocwen or Selene Finance or Bank of America or any number of these dozens of servicers we have now. Is that company a debt collector? No. The test is when they first get my loan is it in default? That's the test. If it is, then they're normally a debt collector. If it's not, then they're normally not a debt collector. What does default mean? Here's something where in the courts a mortgage company, it's kind of funny. You'll be six months behind. It gets transferred to Ocwen or to Nationstar. Nationstar they do something wrong. You sue them under the FDCPA. They go, "Wait, wait. We're not a debt collector. We're a mortgage company." You go, "It was in default." They go, "No, no, no, no. You weren't in default. We had not foreclosed against you." Actually, if they foreclose there's no loan anymore, normally. Default, though, all we have to do is we look at the contract, look at the note, look at the mortgage. It normally says you're in default if you do not pay on the due date. That's it. Due date is the 1st of the month and now it's the 2nd. You haven't paid. Their own contract says you're in default. They go, "Wait, wait, wait, wait. Don't read it that closely. Don't be precise about it. Come on, everybody knows you're not really in default until you're 30 days, 60 days, 120 days." What's funny about that is every other part of the contract they will be so precise, so technical.
If you are one day late they'll charge you a late fee. Let's take foreclosures. They say, "John, we're going to foreclose on you on August the 7th." Okay. "If you don't pay us $10,000 we're going to foreclose." On August the 8th ... Just forget that that's Saturday. August 8th I bring them $10,000. They go, "No, you missed it." I go, "Yeah, but it's one day. Don't be so precise." They go, "Oh, no, no, no, no. Letter of the contract. We're going to follow this contract exactly to the letter." Okay, but you know what? When it says default, you're in default if you don't pay on the exact due date. That's what it means. We have all these companies out there like, "We're not in default. We got the loan on say August the 15th and your due date was August 1st." Yeah, then you paid it on August the 20th. See? You're still within 30 days.
Let's look at the contract. It says, "One day." If I don't pay on the due date, August 1st, it's in default. Nationstar, you got it on the 15th. You're a debt collector. "I hate this. I just hate this law." That's what it is. Answer a question. Does the FDCPA apply to mortgage companies? Sometimes it does, sometimes it doesn't. The test is when they got your loan was it in default? Then, normally at that point they will be a debt collector.
Okay. Our last question is, "What do I do if I want to settle a judgment? What does it do to my credit report? What do I need to do in court?"
$5,000 judgment. Let's say you contact the law firm and you can settle it for $3,000, okay? They say, "All right. You're done." They should fill out a piece of paper and file it called a satisfaction of judgment. It just means the judgment's been satisfied. It's been paid.
You didn't pay the full 5,000, but you paid what they accepted which is 3,000. That's done. Now, the judgment does not go away. It's not like we throw that judgment out, but we say, "We owe zero on it now." It's been paid. It's been satisfied. You want to make sure you get that satisfaction judgment. Then, you want to go to the credit bureau as soon as you get that and point out to them, "Hey, you're showing a $5,000 judgment against me. Really, it's been satisfied. Here's a piece of paper." Of course, normally they'll reject whatever papers you send to them. You can also say, "Just go to the court house and you'll find it." Give them the case number. Of course, they have that on the judgment on your credit report. Say, "Look it up. Get it fixed. Get it to show that it's been satisfied, that it's been paid."
What do you do if the credit bureau doesn't do that?
You sue them. Sue them in federal court under the Fair Credit Reporting Act, the FCRA. That's the law that governs credit reports. If you have a credit bureau ... It's very, very common. When they get information from you they reject it. It's a slightly different context, but our clients would be sued. We would win the lawsuit by some debt collector. Then, we take that order and we send it to the credit bureaus and say, "Get this account off my credit report. I won. I don't owe the debt." When we would not send the order they'd say, "If you had just sent us the order then we would have fixed it. See, it's your fault for not sending the order." Okay. I know that's just complete garbage, but we started including the order and then they would reject it. They go, "We've looked at this and decided that this is likely a bogus document."
They keep it on our credit report. We'd sue them and they would go, "You didn't send us the order." We go, "We did." They go, "Oh, okay." We'd say, "Look right here. You sent us a letter saying you rejected it." They go, "Yeah, yeah. It was probably a fraud." "Did you call the credit bureau?" "No." "Did you write the court?" "No." "Did you write the court to say is this really the order?" "No." "Did you call the collection lawyer?" "No." "Did you do anything?" "No, we just kept it." That's the attitude of the credit bureaus. It all comes down to this. We'll talk about this in another either separate video or maybe another question and answer session. You are not the customer of the credit bureaus. They could care less about you. They don't care. The customer is Discover, the debt collector, the mortgage companies like Nationstar. Those are the customers of the credit bureaus.
Basically, they will do whatever the customer tells them to do. You can send them all the proof in the world. We sent them big packages sometimes. They don't even look at it. We say, "What did you do with it?" They go, "Oh, it was too much. We're on a very tight time frame here. Our workers have three minutes to do a dispute." I'm being a little bit sarcastic when I said, "They don't ever come out and admit that," but that's the truth. They've got to crank through these things. When you send them a bunch of documents they're like, "We are not reading that stuff." If you have a judgment, you're settling it, make sure you get everything in writing, make sure you get that satisfaction judgment. If they put something in probate court, they usually give you something called a release. There are different ways to title it, but you take that to probate court to make sure that lien is not against you or your property anymore.
Always remember about the credit bureaus. You get that satisfaction judgment. Dispute it with the credit bureaus. They'll either fix it ... Hey, that's great. Or, they don't fix it and you sue them in federal court. I think that's all the time we have for our questions this week. Feel free to submit any questions you have. You can comment below this video. You can even call us, 205-879-2447. Third way is you can go our website, Alabama Consumer . There's a little "Contact Us" form. Again, leave a comment. You can call us. You can go to our website. If we can help you in any way, again two ways to get in touch with us, 205-879-2447 or Alabama Consumer. We have offices in Birmingham and in Madison, Alabama. We really represent people all over the state. Always have clients in Mobile or Dothan. All the way from there, Montgomery, Birmingham, Huntsville and really everywhere in the state of Alabama. If we can help you in any way, let us know. Thanks for watching us. Bye, bye.
Welcome to our Q&A on elder law issues. The entire video is above, and the transcript is below.
I hope you enjoy!
My name is John Watts and I want to welcome you to our question and answer session on elder law and estate planning. I’m a lawyer in Alabama. I have an office in Madison, Alabama and our main office is in Birmingham, Alabama. We represent people all over the state. We have elder law clients from the northern part of the state, southern part and really everywhere in between. Today, what we’re going to do is answer some questions we’ve received over the last couple of weeks. I realized it has been maybe a month since we last did this on elder law issues.
We’ve got a little bit of a backlog to clear through but we’ll start doing this every Friday and if you would like to ask a question, you can leave a comment below this and we’ll answer it on the next session or you can contact us through our website Alabama Elder Lawyer or you can even call us at 205-879-2447. We got about 6 questions and we’ll keep this about 30 minutes or so.
Our first question has to do with Medicaid and that is "what is the look back period?"
If you know about Medicaid then you’re familiar there’s a 5-year look back period or even if you’re not that familiar with it, you may have heard there’s something where Medicaid is going to look back in time when we applied for Medicaid.
What is that look back period?
Here’s the situation, if today is August 7, 2015, so if I applied for Medicaid today and I’m qualified for Medicaid, then they look back 5 years in time. What are they looking for over here? They’re looking for gifts. What’s a gift? A gift is where I’ve transferred something like money, a boat, property, whatever it maybe. I’ve transferred something in an exchange I’ve not received the full fair market back. If it’s a $10,000 boat and somebody pays me 2,000 for it and it really has a value of 10,000 well that’s a gift of 8,000. If I just give it away and get zero in return, that’s a $10,000 gift. It’s true with bigger numbers too.
If I have a half million dollar house and I give that to my kid and there’s certain exceptions that apply. We’re not getting all those exceptions, keep them the general, the high level of this law without getting bogged down in the details but if I give away half a million dollar house to a kid, that’s a half million dollar gift. I apply and I qualify. That’s critical. To qualify now, you got to look back 5 years, 60 months and all this time period they’re saying, “What are the gifts that you have made?”
That’s what the look back period is. I believe our next question has to do with the penalty period but that is the look back. We apply the look back 5 years, and let me just say this, 1 implication of this is if … and I use this example, say, last week. I was training the lawyers all over the State of Alabama on Medicaid. I gave this example, what if 59 months ago, my client gave away $580,000 worth of assets and she’s qualified now. I could apply right now and get her on Medicaid.
Should I do that?
If I apply right now and I’m qualified right now and I look back 60 months, what are they going to see? Right here about month 59, they’re going to see she gave away $580,000. There’s going to be a huge penalty.
To give you a real quick version of the penalty, you take whatever those gifts are, divide them by $5,800, that’s what Medicaid says is about the price of a nursing home. Then you go forward in time and that is your penalty, so 580,000 gift. Remember, I made that 59 months ago. I apply to qualify now. They’re going to penalize me 100 months into the future. It’s like 8 years. The key to understanding that look back is if you’re in a crisis situation right now and you’re trying to figure when do I apply right now?
In that situation, you would not apply right now. You would not apply the next month and go a little bit into the future so that when Medicaid looks back 5 years, they don’t see the $580,000 gift and that’s not wrong. That’s just following their rules. That’s the look back period and I hope that’s helpful to you.
Now, our next question is what is the maximum period that Medicaid can penalize us?
We’re familiar, again, if you listen to our last answer, there’s a 5-year look back period so I qualify for Medicaid. I apply for Medicaid. They look back 5 years. They total up all the gifts, divided by 5800 and the answer is the number of months going forward in time unpenalized.
The last example I used was $580,000 59 months ago. Let’s say I applied because I don’t really understand the law and I qualify. Then 580,000 divided by 5800 is 100. 100 months going forward in time. I’ve got to pay for the nursing home bill. People go, "that’s crazy!" I have a lawyer that say he can’t do that. There’s a 5-year maximum on the penalty. There’s no maximum. If you give away $5.8 million then I guess it would be, if my math is right, I got thousand months, what is that? I think that’s a lifetime. It’s a really long time regardless. There’s no maximum on the penalties so the key is in understanding the look back and understanding the penalty is controlling when do I apply for Medicaid assuming I’m qualified.
There are times when we’re qualified and we say I’m applying right now. I know a Medicaid looks back. They’ll see some gifts so they’re going to penalize me. That’s okay. I’ve taken that into account and I have a plan in place to pay for that because normally if somebody comes to us and mom or dad is already in the nursing home, if mom and dad are married, we can save usually 75, 85, maybe 90% of the assets. A single person, we can usually save about half the assets. We can definitely deal with this penalty period. Sometimes we do apply, we take the penalty. Other times we say, you know what, the penalty period would be so big,
we’re just going to continue to privately pay and then at the right time understanding the rules. When we apply and look back, we don’t see those gifts.
If Medicaid doesn’t see the gifts because they’re outside that 60-month penalty period or excuse me, 60-month, I’ll get it right, look back period then there’s no penalty. That is a real key point in understanding 60-month look back and then that be unlimited penalty period knowing when do you apply. If somebody comes to us before they’re in a crisis situation, they will say okay, here’s what we’re going to do with the assets because we know if we get in a situation where we’re in the nursing home how do we deal with that look back. How do we deal with that penalty? We have a plan in place.
Our next question is related to this. Is it illegal to transfer assets?
Now, that’s all that was said. I think what this means is in the context of Medicaid planning or VA pension planning. Is it wrong to give it away? No. It’s not wrong to give it away assuming the person giving it away has capacity, mentally they understand what they’re doing or if they don’t have capacity, somebody has a proper power attorney and they’re fulfilling that power of attorney in the correct way, then sure, you can give away assets.
If you give away assets and then you apply for Medicaid, like we talked about in the earlier answer, we apply for Medicaid. We’re qualified. They’re going to look back 5 years and say did you give anything away. If you did or if your parent or your brother, whoever we’re talking about, you got to say, yes. Now, it’s illegal to lie about it. That’s fraud but if you tell the truth and they say, “All right. Look back 60 months, did you give anything away?” if the answer is yes, you say, “Yes, I did. Here’s exactly what I give away.” If the answer is no, I did not give away anything in the last 60 months then you answer that no. That’s not illegal.
Now, there can be penalties. Right now as I’m recording this August of 2015, the VA does not have a penalty or a look back period but they’re trying to establish one. I think they’re doing it really outside of their power and authority but the word on the street is October 1st. They’ll start this and they’re going to do a 3-year look back period and then there will be a penalty going forward. We won’t get into all that right now but with Medicaid, you look back. There’s a penalty. There might be penalties involved just in the sense that it says okay, even though you qualify we’re not going to give you Medicaid benefits or not give you VA pension benefits because you gave stuff away but it’s not illegal to do that.
Our next question and I think I jumped the gun a little bit here is "what is the change of VA pension is taking about making on look back."
Again, the VA has got say, “All right, if you qualify we’re going to a look back 3 years and did you give anything away.” Their rules right now are a little perplexing what they’re proposing because they match Medicaid but then they don’t and it seems to be a distaste for annuities and we use annuities in Medicaid planning. That’s long been allowed certain types of annuities to be used. It’s a little unclear what the VA is trying to do other than they don’t want people giving away assets and if congress passes that law, that’s fine.
Congress has not passed that law so the VA is trying to do it on their own but it will be if they do a 3-year look back period and then they’ll take, total up those assets that you’ve given away and again it’s a little confusing. It’s at the full amount of the assets or a partial amount. It may be a partial amount based on your total amount of assets that you have. Again, a lot of uncertainty about what the VA is trying to do but then the penalty period going forward us basically taking your pension right.
For a married couple, this could be about $25,000 a year. For a widow, it be about $13,000 even a single veteran, sometimes around 20,000 and that may use that number to give the number of years of penalty. We’ll keep an eye on that and I expect there to be a flurry of litigation about these changes coming to the VA pension. The bottom line is if you think you may qualify or a family member may qualify for the VA pension, probably smart to get on that right away because after October, the VA at least claims that they’re going to be enforcing and now creating this 3-year look back period.
We don’t know if you apply before October but if you’re not fully approved by the time October hits is the VA going to track and go back in time. Is it just a lot of uncertainty, a lot of language that I don’t think they intentionally did it this way but it’s very fussy language, very vague, ambiguous so we’re not sure what the VA is trying to do with that but we’ll definitely update you as we know more information. Our next question is will a revocable living trust protect my assets? I think they really mean their parent’s assets from Medicaid. Let’s say mom and dad, they put assets in to a revocable living trust and then later they need Medicaid, those Medicaid count those assets.
I have this very trustee little treasure chest here. This is a trust. Say mom or dad have cash, investments, they put in a revocable living trust.
First of all, what is a revocable living trust?
That is where the lid is open. You put money in and later I go I’m taking it back out. See, it’s still mine. I can revoke it. I can make this whole thing just go away anytime I want.
Does Medicaid count these assets? Does the VA pension, VA aid and attendance do they count stuff that’s in a revocable living trust?
Absolutely, because the rule is if I can reach in there and grab it then the VA can grab it, Medicaid can grab it.
Medicaid and VA would say, “Hey, those are your assets. Use them.” It definitely counts. We use something called an irrevocable trust or Medicaid planning, VA planning because once I put that in there, and then I apply for Medicaid or VA, Medicaid or VA say, “That’s still your asset.” I go, “No. Look, I can’t open it.” It has to be set up the right way. Follow all the rules of the proper type of trust but it can be done where that is put into an irrevocable trust and then it’s protected. Now, go back to our earlier question. If I put money into an irrevocable trust, I put my residence, beach house, lake house into a revocable trust. That’s still mine. It’s irrevocable. Now, that’s a gift because the trust didn’t pay me for that.
It’s a gift. I have to keep that in mind when I’m looking at, remember the 5-year look back period for Medicaid. Hopefully that answers the question on how does Medicaid, how does VA deal with a revocable living trust.
Our last question has to do also with revocable living trust, kind of a state planning in general, what do I think about? I know I want to set up a trust. What kinds of things should cross my mind?
I just met with somebody, I don't know 2 hours ago maybe and we talked about this. Pretty sizeable amount of assets and the question is what do you want to do with your stuff?
If you’re disabled, if you pass away, one of your spouse’s passes away. What if you pass away and your spouse is still alive, what do you want to happen to your stuff? A lot of times when we ask that question, it’s like, “I want to get to my relatives. Okay, that’s good. Which relatives? We need to know. What percentage? Is it split equally, not split equally? What is it? Do you want them to get it immediately? I die and immediately that money goes to them.” That can be good or it could be bad depending on situations. What about if I’m married and I die, does all my stuff go to my wife and she owns it outright? A lot of people say, “Yeah, that’s great,” and that could be perfectly fine.
What if she remarries and then she sets up a will or trust that says everything goes to my new husband then she dies, what happens to my kids? The new husband may not want to give that money to my kids. Some maybe will say, “When I die, some I want to go to my wife, some I want to go to my kids.” You can do that. There’s no right or wrong answer. You just have to decide what’s best for you and think about the people you’re leaving this money to can they handle an inheritance? Are they in a stable marriage? Are they in a stable business, stable financial condition? Do you want it to be in a trust?" For example, it says, “Okay. When I die then this money immediately goes to a certain beneficiary, a child, a spouse, whoever,” or maybe say, “You know what, it’s going to say on this trust and we may even make it to where that child cannot get to that money instead a trustee, a person with a key has to give it to them to protect the money from creditors, divorces, bankruptcy, lawsuits, whoever it maybe.” The things that think about are what do you want to happen to your stuff? When do you want it to happen? There’s a tension between immediate access to that money, that inheritance and protection of that money, that inheritance.
If we say, “I want my child to be able to get to it, just immediately, at the funeral. They can grab them like, “Okay. That certainly makes it easy,” but it also means it’s easy to blow that money. It’s easy to lose that money. It’s easy to be sued or divorced or whatever it may be. They say, “I want it fully protected. I don’t want any spouse, ex-spouse, lawsuit, business partner to really get to that money.” Okay. That’s going to be hard for the child to get to it because whatever the child can reach and grab their creditors and predators can reach and grab.
Again, no right or wrong answer. You just have to think about these things and this is why sometimes people say what about LegalZoom or, I don't know what the other one, Rocket Lawyer or something like that or going to Office Depot and get a formed will. Will that work? A lot of times it will. People say it’s, I don't know, 200 bucks on LegalZoom. How much do you charge for a trust or a will? I don’t sell a will. I don’t sell a trust. What we sell is our process of helping you think through what do you want with your stuff?
I mean if you say, “I know exactly what I want and I want everything to be left to my wife and then once she dies, I want everything to go to my kids. Can you get that from LegalZoom?" Sure. Now, you’re not getting any counseling. You’re not getting anybody saying you do need to consider what if a child is disabled. What if your wife remarries? What do you want to happen to the money? All those things. When people hire a lawyer, that’s to get that counseling so you go here’s where I am, here’s where I want to get to. It looks like this is the quickest way but sometimes you might need to go like this because that’s actually the better way.
Those are just some things that they think about when you’re talking about estate planning in general. Now, my focus in this area of the law is really on elder laws. Most of our clients are coming to us. There’s been a crisis. Somebody is in assisted living and a nursing home. What do we do now? In the context of doing all that sort of stuff, we do wills, power of attorney, revocable living trust. It’s not pour focus but in order to do elder law which is up here, you’ve got to understand the more basic estate planning. I hope that’s helpful.
I think that is all the questions that we have. At least that we have time for this week.
Feel free to get in touch with us, 205-879-2447. We’re at alabamaelderlawyer.com or you can just leave a comment below this video about things we talked about or maybe a question you’d like to see us answer. We’ll be glad to do that. You can also find us on Facebook at Alabama Consumer Protection Attorneys and we have a lot of people that comment on there and post on there. You can also put a question on there. I look forward to chatting with you next week and thanks for watching. Okay. Have a great day. Bye-bye.
If you’re sued in Alabama, then almost certainly you will receive a letter from a company called Ferry and Nicholas. Normally this is sent to you the day after you are sued, so usually before you’re ever served with a lawsuit, you’ll get this letter in the mail that says, “By the way, you’ve been sued in this county by this company.”
It’ll say something like, “We are a professional mediation company, and you can hire us to mediate your case, so you don’t have to deal with court.”
The question is, is that a good idea to use those guys?
I’ll share with you a couple of thoughts.
First of all, they are not lawyers – at least, that’s what they claim, that they are not a law firm. So you would not get any legal advice from them. Now, I’m not sure. When there’s a lawsuit and they’re saying, “We’ll mediate this,” and then they also call you their client – a mediator doesn’t call one person his client – it’s an odd usage of words.
Anyway, their point is they’re representing you to try and negotiate with the collection law firm, but to me that seems like legal representation. If you’re going to have surgery, go to a real doctor. Don’t go to somebody who’s a fake doctor. I would think that if you’ve been sued, you would want to have an actual lawyer who’s licensed in the state of Alabama to represent you.
One of the problems we’ve seen with this place – at least what we’ve been told – is that they have told their clients, “You don’t have to file an answer. We’re taking care of this. We’ve got it worked out,” and then those people get judgments against them.
Then this “professional” mediation company says, “Whoa, we’re not lawyers! We can’t do anything in court. Sorry, that’s a shame.”
If you’re going to use them, make sure that you’re very, very careful to get your answer in to respond to the lawsuit within the time limit. That’s 14 days from when you were served if you are sued in small claims or district court. It’s 30 days in circuit court.
The first option is bankruptcy. We hardly ever think that’s appropriate, but occasionally it is, and if it’s necessary, then it’s very useful. But if we take bankruptcy off the table, then you have two do-it-yourself options and two options to hire a lawyer.
Here’s what I mean by that. You can fight it on your own, and we can give you some resources to help you do that; you can settle it on your own, and I’ll walk you through a way to do that on your own, or you can hire a lawyer to fight it – in other words, go to court and try the case for you – or hire a lawyer to help you settle it before it goes to court.
If you hire my law firm, we’ll tell you exactly what the cost will be and tell you exactly what we’re going to do. There are a lot of times I talk with people and I say, “You could hire me, but you really don’t need to. You would do better off with fighting it on your own or settling it on your own.”
Other times we say, “I think you hire a lawyer, and if you want to hire us, here’s the cost.”
It’s almost always a flat fee, so you know exactly what it will be. It’s not going to start here and then get higher and higher and higher. It’s just, “Here’s exactly what it is for your case.” We’ll tell you what we expect to happen, what the possibilities are, and exactly how that would work.
If we can help you in any way, feel free to give my firm a call at (205) 879-2447. My name is John Watts. You can contact us through AlabamaConsumer.com. You can also find other articles and videos there about lawsuits.
Going back to this question of hiring a non-law firm or mediation company to help you when you’re in the middle of a lawsuit, my recommendation is no. I think that’s very foolish to do. But I will say this. The good thing about this firm is they will notify you if you’ve been sued. That’s one thing.
Almost everybody that I’ve spoken with says, “I got this letter from this Ferry and Nicholas out of Tuscaloosa or Pennsylvania or wherever they’re from.” They do a good job of notifying people who are sued, so if you get one of these letters, don’t think this is a scam.
Don’t go, “What is this letter? I’m going to toss this away.” If you do that, then you’re setting yourself up, because the court may think that you’ve been served.
We see a lot of bad service out there. The people who are supposed to hand you the lawsuit paper, they just throw them in your yard, they put them in your door, they get blown away. Just be mindful. If you get a letter from this mediation firm, take it very seriously.
You can call the court and find out if you’ve been sued. You can call my firm, and we’ll tell you if you’ve been sued – we can look it up on the online court system.
Just give us a call if we can help you. (205) 879-2447.
Thanks for watching the video and reading this article.
In this video we answer the following consumer protection questions:
The first question is "I have a judgment against me. What do I need to do if I want to pay that off?"
Now, our next question is similar. What if you have been sued, so you get a copy of the lawsuit, but there's no judgment yet. You say, "you know what, I just want to settle this. What do I do?"
Okay, our next question is, "Why should I send a dispute letter to a debt collector by certified mail?"
All right, so our next question is, "I got sued and then the debt collector or debt buyer or somebody like Midland, LV&V, Portfolio Recovery, Asset, Unified, all these types of companies. That company dismissed the lawsuit without prejudice. The question is, what does that mean for my credit report?"
I think this will be our last question at least on this video. "The question is, do I have any recourse if I pay a higher interest rate because of false credit reporting?"
Here's a transcription of the video:
Well, hello, my name is John Watts. I'm a consumer protection attorney in Alabama. I want to welcome you to our question and answer session where we will answer your consumer protection questions.
We have received a lot of really good questions. I've got a lot of those written down, probably more than we can cover in this session, so we may end up doing two sessions today so the videos won't be quite so long.
The first question is "I have a judgment against me. What do I need to do if I want to pay that off?"
The context of this is a debt collection judgment. Now, it could be from an original creditor like Chase or Capital One, but it could also be from a debt collector suit, and now this person has a judgment against them. They were properly served, so there is not basis to undo that judgment.
What do we do? You can pay it off.
Now, a couple of ways to do that. One could be through garnishment, so if they are already garnishing your wages, you might say, "Ah, I'm fine with that. Just keep taking out that 25% of my paycheck every week or every two weeks."
Or, you can try to negotiate a lower monthly payment. It's not really appealing to the company that has a judgment because if they can get $400 every two weeks, why would they agree to take 200 from you? But sometimes circumstances will allow that.
The most common way to pay these off is with a lump sum. Let's say you owe $5,000. That'll be our example. Maybe you can go to them with a $3,000 lump sum, and they'll agree to take it. There's a lot of factors. If you have been at your job 27 years, versus you have had 27 jobs in two years. They might be more likely to take a lump sum if your employment history is not real solid. How much are they getting out of the garnishments? If they are getting a whole bunch, they might say, "Ah, we'll just keep that coming." If it's a smaller amount, they may say, "Yes, we want the money right now."
Then just a lot of times, they do want the money. Money in-hand, versus maybe you'll get payments in the future. A lot of times money in-hand is very appealing. Here's a procedure I suggest.
We do something similar if we've been hired to do this, but if you do it on your own, this is what I would suggest. You want to get an agreement in writing. In other words, how much do I have to pay on this $5,000 judge to be done with this? Is that 3,000, 4,000, 2,000, what is that? That's what you want to do. Then make that payment and usually it's easier if you do it by certified check, cashier's check, some kind of official check rather than just a personal check. Now the collection lawyer has to wait seven days, 14 days, make sure that that's good if its done by personal check.
Once that is paid, then you want to make sure that the collection lawyer, and you get this agreement ahead of time, that when they get the money, they will file something in court, called a Satisfaction of Judgment. All that means is there is this judgment out there, and if somebody's looking that up, they go, "Ah, there's a judgment against you." Then they see this piece of paper and it says the judgment has been satisfied, or it's been paid off. You have satisfied your obligation. That lets the world know, yes there was a judgment, but now you owe zero on it. $5,000 judgment. You pay $3,000. Even though you didn't pay the full five, if the deal is $3,000 and you are done, then they should file that satisfaction of judgment.
Now here's the problem. Normally, judgments will be on your credit report. The credit bureaus are ... how can I say this? ... either very slow or not particularly interested in updating your report to show that you owe zero on this $5,000 judgment.
What we suggest is you get that satisfaction of judgment that's filed into court. There's a stamp across it. It says it was filed on July 15 at 2:33pm. Great, so you get a copy of that. You send that to the credit bureaus, and say, "look, guys, you are reporting on page one of my Equifax report," or TransUnion, Experian, whoever it is. Usually it's all three. "You are reporting that I owe $5,000. Please look at the document I have enclosed. You will see I owe zero now. Please update it." Usually if you take the effort to notify the credit bureaus, then they'll update it, but even then, sometimes they don't. They'll keep that on your credit report. They know that that damages you, it harms you. Here's a simple solution.
Assuming it's appropriate, and we have done this many, many times, you talk to a lawyer that does this type of work, so if you are in Alabama, we'll be happy to help you. We file in federal court a lawsuit against the credit bureaus and say, "You have false information on my credit report." They go, "But wait, you had a judgment for $5,000." We go, "that's true, but look here. Satisfaction of judgment. I owe zero. You are doing false credit reporting by telling the world I still owe $5,000." When we do that, the credit bureaus, they make all these excuses and arguments and all this stuff, but at the end of the day, they know if they have been caught, they have to delete that from your credit report. That's one of our requirements, not just that it be updated, but we want the whole thing off. They got to pay you money, and they got to pay us money. They know that's the deal when they lose these cases.
So if you are looking at paying off a judgment, that's my suggestion for what to do.
Now, our next question is similar. What if you have been sued, so you get a copy of the lawsuit, but there's no judgment yet. You say, "you know what, I just want to settle this. What do I do?"
Similar to what we just spoke about with the judgment, call the collection lawyer if you are handling this on your own, get an agreement in writing, so again, say they are suing you for $5,000 and the agreement is you pay three grand, get that in writing. That could be a letter. It could be an email, but you want to make sure it's very, very clear. We've had lots of cases where people pay the three thousand, the debt collector still comes after them for the $2,000, but there is no $2,000 owed. See, I owed five. I paid you three. That was the deal, so we owe zero now.
If you don't get it in writing, they will go, "Oh, I just thought that was a partial payment." No, let's make it very clear, in writing. $3,000 and we're done with this lawsuit.
Then you want to make sure that the collection lawyer dismisses that lawsuit with prejudice. With prejudice means they cannot sue you again. It's over. It's done.
Well, is that the end of it? No, because you want to look at your credit report because Capital One or Midland or LVNV, they are saying on your credit report you owe $5,000. If you settle with them for three, and it's done, then the case is over. Case is dismissed with prejudice, then your credit report should say you owe zero dollars. Now, it can say that at one time you owed five. That's fine, but now you owe zero. Just like we did with the judgment, usually what we want to do at that point is send a letter to the credit bureaus, and say, "Look, you are reporting inaccurate information."
Here's the reason why.
Capital One, Midland, whoever it is, they often won't update the credit bureau, Equifax, Experian, TransUnion. They won't tell them that you owe zero now. A lot of times in their mind, you still owe them two, and they may say, "Oh, you know what, we could sell this debt to somebody else."
You want to catch this very quickly, so you write the letter and you say, "My Midland account" ... or Capital One or whoever it is ... "you say I owe five. I owe zero. If you have any doubt, check with Midland or Capital One or whoever sued you."
Sometimes you include a copy of the order dismissing the lawsuit with prejudice. Then they'd say they are going to get it fixed, or if it doesn't get fixed, you sit down with a lawyer. Again, if you are in Alabama, we'll be happy to help you. We do this all the time. We file suit in federal court against the credit bureau, and the furnisher. The furnisher is the Capital One, the Midland, whoever it may be who's doing that false credit reporting.
Now, we'll say this. If it's a debt collector, sometimes you don't have to do that dispute. There are some different laws. I don't want to get bogged down in that, but the point is, you were sued for five grand. Now that's over. That's done. You want your credit report to reflect that, not to show that you still owe 5,000 or maybe you owe 2,000 because they just took five minus three, and they go, "Oh, you owe us two." "No, I don't owe you anything. Zero. Nothing." Make sure your credit report shows is accurate.
Okay, our next question is, "Why should I send a dispute letter to a debt collector by certified mail?"
This was somebody that had seen that on our websites and videos and books, we always talk about, if you are dealing with a debt collector, and if you send anything to a debt collector, do it by certified mail. If you are not going to do that, then you are just wasting your time.
The reason is, you can have the greatest whatever it is, letter, settlement proposal. I don't care what it is. Anything you are doing with a debt collector in writing. You could have the most perfect letter. That debt collector gets it, looks at the envelope, "Huh, not certified mail. Just throw it. Just chunk it. It's no good." Maybe that was a cease and desist letter. "Hey, do not communicate with me anymore." Once they get that, they can't call you again, but they'll keep calling you.
You go, "Wait a minute. I sent you a cease and desist letter." They go, "What cease and desist letter? We never got a letter from you." You go, "Yeah, I put it in the mail. It got to you. It never came back."
They go, "Well, we never got it."
Well, how do you prove that? You really can't. You do it by certified mail, because when they lie about not getting your cease and desist letter or your dispute letter, or whatever letter it is, when they lie about that, you pull out this green card and say, "right there. You signed for it."
Then it's funny to watch them squirm. They'll say, "somebody stole the certified mail."
"Really? Somebody stole the certified mail from you?"
They go, "Well, maybe they didn't steal it, but it got misplaced. That's not our fault."
"Actually it is, because you got the green card and you lost it. That's not my fault. It's your fault, debt collector."
It's interesting to watch, and they almost always have ... there is this progression, "We never got it. We never got it. Maybe we got it. We lost it. When you said 'don't ever call me again,' we didn't know what that meant, so that's why we kept calling ..." They just go through this progression of lies.
You have to do it by certified mail. Seven bucks, I think. It's worth the money. If it's important enough to contact a debt collector, it's important enough to do it by certified mail.
By the way, this applies to credit bureaus, really anybody that you are communicating with, we kind of joke about ... What is certified mail? Well, the expression we use around the office is, "no good news comes by certified mail."
What do we mean by that? It just means, certified mail is ... This is not always true, but it is true enough. When you are sending a letter to somebody and you think that they will lie about getting it, so you want to prove that they got it. That's when you do certified mail. Now, you could also do FedEx. You could do UPS, priority, just something that has a tracking mechanism in it, where somebody has to sign for it or somebody saying, "Hey, I delivered this," but the safest thing is certified mail.
All right, so our next question is, "I got sued and then the debt collector or debt buyer or somebody like Midland, LV&V, Portfolio Recovery, Asset, Unified, all these types of companies. That company dismissed the lawsuit without prejudice. The question is, what does that mean for my credit report?"
Let me back up and make sure we are on the same page. A dismissal with prejudice means the case is over. That could be because you settled, or it could be because they realize they can't prove their case and they just drop the case. With prejudice means they cannot sue you again. Now, we have a situation right now where a case was dismissed actually by a jury or a verdict, not a jury verdict, but the judge ruled in our client's favor, and then they sued us again on the same day.
It's like this completely outrageous thing that this debt buyer, Main Street Acquisitions, did. Let's put aside companies that will do things that absurd. Dismissal with prejudice means it's over. They can never sue you again, or at least they should never sue you again. Maybe companies like Main Street, they struggle with that concept, but most companies get it, that dismissal with prejudice, it's over.
Now, where they stumble is, they don't understand, and I'm taking this outside the settlement context, dismissal with prejudice, they got to get this thing off your credit report, under most circumstances. They can never call you, write you about it as the lawsuit is over and done with now....
What if it's without prejudice. Without prejudice means it's almost like the lawsuit never happened, so the next day, the next month, the next year, they can sue you again because they never really "lost" the last case.
That new lawsuit, they have to make sure it's within the statute of limitations, that it's a legitimate lawsuit, but the fact that back here they sued you and dismissed without prejudice doesn't prevent them from doing it again. They can sue you again. In and of itself, a dismissal without prejudice does nothing for your credit report.
With prejudice almost always means they have to get it off your credit report. But without prejudice doesn't mean that.
Here's what it does mean. If you were sued, so you get a copy of the lawsuit. You file an answer, and say, "I deny owing Midland, ..." Main Street, Unified, whoever it is ... "I deny owing you this debt."
Well, that's a dispute. Then if that company is credit reporting, and at least if they update your credit report ... I won't get into all the details about what if they don't update, but if they do update, and almost all the companies that credit report, they do it every single month because they want that fresh notation on your credit report, so it will be the most damaging possible to you, to motivate you to pay the money.
If it's without prejudice but you filed an answer denying it, and then they update your credit report, they have to show your account is being "disputed." We've had them in the past say, "Well, that wasn't a dispute letter."
We're like, "Seriously? A pleading in court filed in the court that's an answer, that's like the ultimate dispute letter."
We don't get those arguments, at least not very seriously. They will make them kind of on the front-end and they go, "Okay, yeah, yeah, I know you disputed it." If they don't mark your file as being disputed on your credit report, you may can sue the debt collector under the Fair Debt Collection Practices Act, the FDCPA. It's a subsection called e8 that has to do with credit reporting.
To answer this question, sued, dismissed without prejudice, what does that mean for my credit report, if and of itself, it doesn't mean anything, but probably you filed an answer, so we have to check your credit report, and if it's incorrect, then we look at suing these guys. I hope that that's helpful to you.
I think this will be our last question at least on this video. "The question is, do I have any recourse if I pay a higher interest rate because of false credit reporting?"
The answer is probably. Let me kind of walk you through it.
If we're talking about a debt collector doing false credit reporting, then the answer is yes. There are statutes of limitations; there are other issues, but normally you can sue under the FDCPA, the Fair Debt Collections Practices Act, for false credit reporting.
What if it's Capital One? What if it's the bank that you took out your mortgage with? What if it's one of those companies, and let's just assume they are not a debt collector, so they are not subject to that FDCPA, the Fair Debt Collections Practices Act? You can sue under the Fair Credit Reporting Act (FCRA), but generally, not always, but generally, you have to prepare a dispute, online, over the phone, or what we suggest, in writing.
You have to give that to the credit bureaus, that's Equifax, Experian, TransUnion. Then after that, they have 30 days to investigate. If they don't fix it, then at that point, you can sue. At that point, you have damages, okay? It can get a little complicated on when the damages start.
Can you go back in time and get damages? That's a legal issue that there's a lot of moving parts to that, that I don't want to get bogged down in this video, but I'll just say this. Any time you see false credit reporting, you want to take action. If it's a debt collector, maybe you just go ahead and sue them. That tends to get them to fix it right away. If it's not a debt collector, dispute it. Even if in the past, this cost you a higher interest rate, go ahead and dispute it. Get it fixed now.
If it gets fixed, then we can talk about it. If you live in Alabama, we can talk about can you still sue that company or the credit bureau. If you dispute it, and they don't fix it, then we can certainly look at suing them in federal court.
Then it's some legal issues about can we go back and sort of pick up those damages. I'll give you an example. Say you refinance your house, and because of errors on your credit report, you get 7% interest. If those weren't on there, you would have got 4% interest. Well, that's a pretty good spread. Well, but you don't realize this, and later you dispute through the credit bureaus, and they don't fix it. Then you sue. Can you go back and get damages for paying 7 instead of 4. Maybe, maybe not. But you can try to get a new loan now to "mitigate" your damages.
Here you are trying to get another loan. If that loan comes back at 7% or 8%, now you have your damages. Again, there's a lot that goes into that, but the point is, if you are paying more, higher interest rate than you should be paying, and the credit bureaus or Capital One, or debt collectors, whoever it may be, if these guys don't follow the law, then normally you have the ability to file suit. T
hen it's just a matter of well exactly what damages can you get out of that.
I hope that this is helpful and this whole series of questions on consumer-related subjects has been helpful. If you live in Alabama, and you want to chat with us, pick up your phone and call us at 205-879-2447, or you can contact us through www.AlabamaConsumer.com. That's our primary consumer website, and we'll be happy to set up a meeting or set up a phone call with you and go over some options with you. Thanks again for watching this, and if it was helpful, feel free to "like" it or share it or comment. That'll help us to spread the message. Thanks. Have a great day. Bye-bye.
Welcome to our blog post. In this webinar we covered only consumer protection questions including:
1. I got sued but the account is not on my credit report so is it too late to be sued?
2. Is it important to respond to a summary judgment motion in my ejectment case after a foreclosure?
3. If there is a default judgment against me from months ago what can I do since I was never served with the lawsuit?
4. I took out a loan and now a collector is saying my husband has to pay the debt. Is this legal?
5. I'm defending myself in a debt collection lawsuit -- do I need to know all the rules of evidence?
6. Is it too late to undo a foreclosure after I've been sued for ejectment?
7. When does the FDCPA apply to a mortgage company?
8. Why is it a big deal if a debt collector takes your money without permission -- does this really harm you?
Here is the transcription:
Well, hello. My name is John Watts and welcome to this webinar. I actually tried to do this a little bit earlier and had some technical glitches there, but hopefully this will work out. I'm a Consumer Protection and Financial Protection attorney in Alabama. On Fridays at 10:30 Central Time, we are going to be doing a regular webinar where we answer questions that are submitted. You can submit them ahead of time or do it actually during the webinar. We'll have the links and how you sign up for that webinar, and there's no charge for it, that'll be provided either in the description here, or you can go to one of our two main websites, www.AlabamaConsumer.com or www.AlabamaElderLawyer.com.
I do want to tell you this before we get into these questions. I've got a pretty good list of questions here. I'm not giving legal advice, this is general, educational information. I'm really trying to help you understand a base level of knowledge and then you can build on that to ask questions to meet with an attorney, whether that's me or somebody else, to actually get specific legal advice. We hope this will be helpful.
I think today all of our questions are consumer protection-related. We're talking about debt collectors, collection lawsuits, credit reports, foreclosures, things of that nature. On Friday, we'll have those, but then we'll also have some questions on what's known as elder law. How do we pay for long-term care without losing everything we own? How do we get Medicaid? How do we get the VA pension? What about a special needs trust? Do I need a will or do I need a trust? All these types of questions.
I appreciate you being here. Like I said, this was a completely unscheduled webinar that we're doing. I hadn't told anybody about it, I wasn't planning on doing it, but we had requested on our Facebook page (Alabama Consumer Protection Attorneys) to either publicly put a question up or privately send it to us and had great response. Actually, too many questions to cover on Friday, so let's go ahead and get started.
The first one is, "I got sued by Capital One. I looked on my credit reports, and it's not on there. Is it too late to sue?"
First of all, I want to say if you've been sued, that's very smart to pull your credit reports to see what is this account saying? Because it could be Capital One suing you, it could be a debt collector like Midland, Portfolio, LVNV, all these companies out there filing literally 100 lawsuits or more a week each. Tremendous amount of lawsuits in Alabama. It's smart to get your credit reports and check that out.
Just because it's not on your credit report does not mean that there's too much time that has gone by. Basically, when you have what's called a first major delinquency, that's kind of a trigger. Then we go forward about seven years. That's how long it can be on your credit report. What about the time period to sue? That's what we call the statute of limitations. A lot of controversy over it, I frankly don't think it's that complicated, but we say it's three years, the collection industry says, "No, no, it's six years to sue."
There's arguments about, "What if you go three, four, five, six, seven years, don't make a payment, and then you make a $5 payment? Does that restart the statute of limitations?" The collection lawyers say, "Oh, absolutely. No doubt." It's not quite that simple. Again, you meet with a lawyer to get more specific information. I'm just giving you a general, we're not covering every exception to every exception here. Basically, you look back and say, "When was my last payment?" Then you start going forward from there. Are you more than three years? Are you more than six years?
If you've got seven years for credit reporting and some smaller period of time for statute of limitations, if it's not on your credit report, then obviously it's beyond. Well, maybe not. Because it could be it's just not reporting. It could be it was mistakenly deleted. You definitely want to look at that long period of time for credit reports. Look at your credit reports. It'll have "date of last payment," "date of last activity," that's important to you. A lot of times we find what's on the credit report conflicts with what they're saying in these lawsuits. Very helpful to pull your credit reports, but just understand simply because it's not on your credit report, doesn't mean that it must have been more than seven years ago. Maybe it was, maybe it wasn't.
The last thing I'll say, and this is something we harp on a lot because the biggest danger when you've been sued is not answering the lawsuit. You get what's called a "default judgment." You lose. Regardless of anything else, you lose. Understand this. When you've been served, when you get a copy of the lawsuit, you have 14 days to answer. That's in Small Claims or District Court. You have 30 days to answer if you're in Circuit Court. Keep those dates in mind. If you have a statute of limitations defense, then you put that in your response.
Definitely get with a lawyer, find out what your options are. A lot of times you can handle this on your own, either to fight it, to settle it, or you can hire a lawyer to fight it or settle it. Occasionally, bankruptcy is appropriate. We do have a long webinar, I think it's an hour and 20 minutes or something, on your five options, and then we answer a whole bunch of questions that naturally come up. To answer this question specifically, just because it's off your credit reports does not mean it's too late to sue.
Our next question is, and this is in a foreclosure context, "Is it important to respond to a summary judgment motion in an ejectment case?"
The answer is absolutely. Definitely need to respond.
Let's define a few words. What is an ejectment case? Again, we have a long video on mistakes people make in an ejectment lawsuit. Basically, an ejectment lawsuit is you got foreclosed, the alleged new owner, usually the mortgage company, says, "You got to get out of the house." You don't get out. Then they sue you. Where are they trying to go to? They're trying to go to a court saying, "You are evicted from your house. You're ejected from your house," you might say. Then often, they want money damages against you for hanging out in the house after the foreclosure.
What's a summary judgment? That's a motion, and almost all motions are in writing. A motion is just where you ask the judge to do something. Here, the mortgage company, in writing, says to the court, "Judge, there's no reason to have a trial. No reasonable jury, no reasonable judge could ever find in favor of the homeowner. You need to grant us judgment." You might think of it as summarily granting judgment. We don't have to waste time with a trial, that's the argument.
You'll get those papers. Usually there's affidavits, documents, supposedly evidence that may or may not be admissible. Then the judge will normally set that for a hearing. If you don't show up at the hearing, you normally lose. If you don't file the right type of materials, the right type of response to that summary judgment motion and follow the rules, then you lose.
What does that mean if you lose? If you lose, that means they have an order that says you got to get out of your house. Now a sheriff will come, knock on your door, and say, "Get out." People will say, "That's unfair. I want my day in court. I'm going to skip this summary judgment. I'm just going to go have my trial." You can say that, but if a summary judgment is granted against you, there is no trial. That is your day in court. Very serious. You need to take it very serious. You need to treat it with the respect that it's due. If you're facing a summary judgment motion, that is somebody trying to kick you out of your house so that you don't get to a trial. Make sure that you handle that properly.
Again, we have a video and we'll try to link to that in the description under this video for that five mistakes when you've been sued in an ejectment action. Really, what we try to do at that webinar, like I said, I think it's maybe an hour and 20 minutes long, is say if we were having a face-to-face meeting and you didn't really know a whole lot about this type of law, you didn't know what your options were, then that would be us explaining that to you. Rather than doing that in person or over the phone, put it on video. That way when we do have a meeting, we can just focus on what we actually want to focus on, which is do you stay, do you fight, what are your odds, what's in your best interest to do?
Our next question is, "If there is a default judgment against me from months ago, what can I do if I was never served?"
When a lawsuit's filed against you, you have to be served the papers. If you're not served the papers, and we'll talk about what that means in just a second, but if you're not served the papers, then really that judgment's not going to be any good against you. You can get it what's called vacated or the judge will say it's void. It's like it never happened. Because you have a constitutional right to actually get the lawsuit so you can defend yourself.
Now, what does it mean for a default judgment? If you don't answer after you've been served, so you get served, you don't do anything, 14 days Small Claims, 14 days District Court, 30 days Circuit Court, then the judge will write in there, "All right, you lose." What if you find out about this when there's a lien on your house, or your bank account gets wiped out, your wages get garnished, you say, "I didn't know anything about this lawsuit." If you knew about it and you just made a mistake and didn't respond, you have a very limited amount of time to challenge that default judgment. If you never served, there really is no time limit.
Let me illustrate it this way. I sue Bank of America a lot. I sue Equifax, collection companies all the time. What if I sue Bank of America, I file it in court, and I say, "Okay court, I'll take care of serving Bank of America," but instead of actually serving them, I just put it on my bookshelf over here. Is Bank of America going to respond to that? No, because they don't know anything about it, so how would they respond to it? Then I go, "Well hey, I served them," the period of time goes by, "Now I want a default judgment." That would be unfair to Bank of America. It's unfair if Bank of America, Capital One, National Collegiate Student Loan Trust, Midland Funding, Portfolio Recovery, whoever it is, if they sue us and we have not been served, then that is unfair and it's unconstitutional.
Here's the trick is if they say, "Hey, you've been served." Sorry, I dropped my paper here. This will be our prop here. You've been served with a lawsuit, but you go, "I really haven't been served with it." Then you attack that service.
First, let's talk about, what does it mean to be served? It means you're physically handed the paper. That could be anywhere. In a plane, in a movie theater, at your house, at your work, on the beach, it doesn't matter. Physically handed it. You're served. What if you don't get it physically handed to you? It could come by certified mail. As long as the rules are followed, then you're served. You sign for the certified mail. Here's the more common thing. They say that they served you personally.
Let me give you an example. I had a guy that supposedly served, I want to say five years ago. It was in Birmingham. They said, "Hey, we served you in Birmingham." He goes, "John, I was never served in Birmingham." We look at the paper and we said, "Okay, it says," I forget the date, I'm just going to make this up, "April the 10th at 2:33 p.m." I'm like, "Where were you April the 10th, 2:33 p.m. in 2010?" We had him go through his emails, check with his wife, look at his pay records. He was working in Texas. He had pay stubs from Texas. It's kind of hard to be in Texas working and yet be here in Alabama being served. Arguably, he jumps on a plane, lands in Birmingham, they serve him in Birmingham, then he flies right back to his job. Kind of crazy, but okay, it's possible.
I said, "Go through your receipts, go through your credit card." We found where he had bought gas. I forget the exact details, but his shift was 6 a.m. to 3 p.m. They said he was served at 4 p.m. and he was buying gas in Dallas, Texas at 4:01 p.m. and he worked until 3. You can't really get to Birmingham and get back in time. You just show that you weren't really served. Maybe you were in ICU. Maybe you were traveling out of town. Maybe you were in court. Maybe you were in surgery. Whatever it is, show that that was not you.
Sometimes it's obvious. You look at the paper and it'll say, "I served John Watts. He's redhead, 5'2", 475 pounds." I'm 6', about 170, I don't have red hair, I think I have brown hair. My kids say I have gray hair, I don't know, maybe I do. I like to think it's brown. Anyway, it's not red. I can look at this and say, "Wait a minute, that wasn't me."
Here's the most common one though. It's they take it to your house and they leave it with somebody. They say, "A-ha, you've been served now." What does the law say? Generally, the law says if they give the paper to somebody that lives in my house, an adult who lives with me, then I have been served, even if that adult doesn't give it to me. What that means is your 16-year-old kid is not an adult, your cousin that's staying with you for a weekend doesn't live there, somebody doing work on your house doesn't live there. They might take the papers and the sheriff's deputy, or the process server, somebody like VanSlam, whoever it may be, they may think they're really giving it to somebody that lives there, but if they don't really live there and they're not an adult, it doesn't matter. It's bad service.
If you were never served, there is no time limit to undo that judgment. Remember my example. Let's say I supposedly serve Bank of America, but I really don't and I get a $500,000 or $1 million judgment against them. They challenge that at any time because they were not served. Same thing with you.
Going back to this question, if I get this default judgment, what do I do? You file a motion. Remember, a motion is just a written piece of paper where you're asking a court to do something. The motion, you can hand write, you can type it, if you go to a lawyer, we type our stuff. You'd say, "Hey, I want this judgment undone. I want it torn up because I was never served. Here's my proof." You might use medical records, travel, things, you'd use affidavits, all sorts of things you would use to prove you were really not served in this lawsuit. If you're successful, then the judgment gets thrown away.
It doesn't make the lawsuit go away because now they have to serve you. Normally by coming into court, the judge will say, "Okay, well now you're served." File your answer, 14 days Small Claims, 14 days District Court, 30 days Circuit Court. It gets rid of the judgment, it gets rid of the garnishment, keeps them from selling your house in a sheriff sale, putting a lien on your house, so very valuable to get rid of a default judgment.
The next question is, "I took out a loan, but now the debt collector's harassing my husband saying he has to pay it. Is this legal?"
Here's the deal. A debt collector can try to collect the debt against somebody who owes the debt, not somebody who doesn't owe the debt. If I owe the debt, they cannot go to my neighbor, my brother, my mother, my kids, my wife, they can't go to any of those people to collect the debt. I don't want to get bogged down with this, but they can talk to my spouse and says, "You know John owes this debt. What's John going to do about paying it?" That's okay. If they talk to my kid, if they talk to my neighbor, or my mother, the preacher at church, that's going to be a big problem for them under what's called the Fair Debt Collection Practices Act.
They can talk to your spouse. What they can't do is say your spouse owes the debt if your spouse does not owe the debt. If I owe a debt, then I'm the one that owes it. My spouse doesn't owe it. My children, they don't owe it. My neighbor doesn't owe it. They can only collect it against me.
In the question we have, it says, so this is a wife who wrote this in, "I took out the loan, but now a collector is harassing my husband saying he has to pay it." No, that's illegal. Now, a lot of times, collectors will say, "Wait a minute, are you married?" "Yeah, I'm married." "Did you know your wife had this debt?" "Yeah, I knew she had the debt." "Then you're responsible for it." That's not the law. At least not the law in Alabama.
If you have a collector that's trying to collect a debt against somebody who does not owe it, for example, your wife, your husband, your children, whoever it may be, then that is normally going to be illegal under the Fair Debt Collection Practices Act, the FDCPA. Either you or the person they're trying to collect it against, sometimes both, need to look very seriously at suing the debt collector in federal court under the FDCPA.
Because here's the deal. When you sue these abusive debt collectors that break the law, it does a couple things. One, you tend to get money if you're successful. Your lawyer's paid for. They tend to leave you alone. Even more than that, what you do is you protect the community. Because these debt collectors are used to just abusing people on the phone and there's no worry about being sued. Then somebody sues them, they go, "Whoa, wait a minute. Maybe we should start following the law."
What does that do to the community? It makes the community safer. Because you standing up for your rights and suing a debt collector is going to make it more likely that debt collector will follow the law, less likely the debt collector will break the law, and it helps the honorable debt collector. The debt collectors that read the law and say, "Okay, I'll do what I'm supposed to do." They now can be profitable. They can make money, keep people employed. If you got some debt collector over here that reads the law and goes, "I'll just do whatever I want. I don't care what the law says. I'm going to break the law because I'll make more money." That's unfair to the debt collector that's trying to follow the law.
If you have a debt collector breaking the law, my very simple approach is we sue them in federal court. We don't talk to them. We don't write them. We don't email them. We sue them in federal court. Then when we've got them in court, now if they want to talk, we can talk about settling, or we can go to trial. It's amazing. When they get caught, they tend to want to write you a check, they write me a check, and they leave you alone. That's the typical way this works because they say, "Oh my goodness. You are somebody that's going to stand up for your rights and we cannot abuse you." It might have been a $300 amount they were trying to collect, but that may cost them $10,000, $100,000, $200,000 depending on how bad their conduct is, so they tend to go, "Whoa, we don't want anymore of that." I hope that that's helpful to you.
Let's see, our next question is, "Do I need to focus on the rules of evidence if I'm trying a case by myself?"
Here's the deal. This is talking about a debt collection case, so Midland Funding, Portfolio Recovery, Calvary, LVNV, Asset Acceptance, all these debt collectors out there that sue. Some of these guys file 100 lawsuits a week in Alabama. It's amazing. If you've been sued in District Court or Small Claims Court, so we're normally talking about below $10,000, then it may be a good option to represent yourself.
We have a long webinar on the five options you have to know about when you've been sued. I think it's maybe an hour and 10 minutes long. We also go through a bunch of questions that just over and over and over were asked. Those five options are file bankruptcy, fight it on your own, settle it on your own, hire a lawyer to fight it, and hire a lawyer to settle it. Bankruptcy is very rarely appropriate. Fighting it on your own can be very helpful.
This question is saying, "If I'm going to go in there and fight it on my own, do I need to know all the rules of evidence, and all this case law, and basically be a lawyer?" The answer is no. Would you be better off to have a lawyer? Probably. If you had the right lawyer, you would expect your chances of success are going to go way up. In Small Claims or District Court, if you will be focused on the key issue, and I'll get to that in a second, then you have a chance of being successful. That way you're not paying any lawyer fees.
If you're successful, we want to look at what did that collector do in that lawsuit? What did they do on your credit report? What did they do, other collection activities against you? Because maybe we can sue them in federal court. If you remember the last question we answered, when you sue them in federal court, they tend to pay you money, pay your lawyer money, and they go away. There are some advantages to doing this on your own.
I may not get this quote exactly right, but it was something like Bruce Lee said, "I don't fear the man who knows 1000 kicks that he's practiced one time each," he said, "I fear the man that knows one kick that he's practiced 1000 times." The idea is be competent, be skilled in something, something you're really good rather than just a whole bunch of things that you're not very good at. When you're representing yourself at trial against these debt collectors, the fundamental issue, and when we teach lawyers this, this is what we harp on all the time, the fundamental issue is ownership.
If you go to our blog, it's Alabama Consumer Law Blog, I want to say it's 2007, March 2007, we wrote an article and it went viral, or blog post, I guess. It was saying when you get sued by a debt collector, they have to prove not only that you owe the debt, kind of makes sense, they're suing you for a MasterCard, a Discover Card, they got to prove you owe it. If you don't owe it, they lose. That's where the analyses stop for so many people, even for courts. What we said is, "No, no, no, that's not enough. Yes, you must prove I owe it, but you must prove that you own it." It's those two things. Prove I owe it and prove that you, debt collector, own the debt.
Take Bob Smith. He gets sued by Midland Funding for a Chase card and they want to go into trial and say, "You took out this Chase card." "Yeah." "Here are some statements." "Okay, those look like the statements." "You had a $3,000 balance." "Yeah, I think so." "You didn't pay that." "That's right." "You admit that you owe the $3,000 on the Chase card." "Yeah, I owe Chase $3,000." "You admit that you owe my client the money."
Whoa, no, no, no. That's a different question. Whether I owe Chase has nothing to do with whether I owe Midland, or Portfolio, LVNV, Asset Acceptance, whoever we're talking about, unless LVNV, or whoever the debt buyer is, can prove they own the debt. The debt is like this piece of paper. If they own it and they can prove it, then fine. If they show I owe the debt and they own it, yeah, then they're going to win unless statute of limitations, or some other defense.
What they want to do is come into court and go, "See, the defendant owes the debt. The consumer owes the debt, and so just assume that we own it." We don't do that in court. If you sue somebody, you got to prove it. You can't just go in there and say, "I sued, I probably own the debt."
I've used this example before, it's kind of a silly example. Let's say you owe Bank of America $1,000 a month for your mortgage and I sue you. John Watts sued you. I get you on the stand and I say, "Isn't it true that you live in a house?" You go, "Yeah, I live in a house." I go, "Isn't it true that you have a mortgage on that house." "Yeah." "You owe a debt on that house." "Yeah, I owe $100,000." I go, "Isn't it true that it's $1,000 a month?" You go, "Yeah." I go, "Here are all these statements, $1,000, $1,000, $1,000." "Yeah, those are statements." I go, "You admit that you're behind right now." "Yeah, I'm behind." I go, "Judge, I think I've proved my case. I get the money."
The judge will say, "Hold on. You proved that he owes money to Bank of America. What does that have to do with owing money to John Watts? That's crazy." I go, "Judge, do you think I would come into this court if I didn't own that debt?" The judge will say, "Prove it. Prove that you own the debt." If you think about it, if I own the debt, how hard could that possibly be to prove that I own it? If I'm driving a car and somebody says, "Is that your car?" I go, "Yeah, that's my car." They go, "Prove it." I go, "Whoa, whoa, now that's too hard to do. It's not like I have a title for it or a bill of sale. Oh wait, I do have all that." Debt is the same way. They have to prove that they own the debt.
In my opinion, these are the two most important things you can do. It's not trying to figure out all these rules of evidence, you're staying up until 4 in the morning trying to research what somebody in Florida says they do in lawsuits. You're in Alabama, you've been sued in Alabama. Here's my suggestion. Your obligation as a witness is to tell the truth. It's not to speculate, it's not to guess, it's not to go, "I don't know, I'll just make something up." No, you raise your hand, promise to tell the truth, you need to do that.
When they ask you these questions, "You know that we own the debt." How would you know that? How would you possibly know that? You have no earthly way of knowing that. This is a secret deal between Chase and Midland Funding. Sometimes it's Chase and Portfolio Recovery, who then sells it to Midland Funding, who then sells it to LVNV. How would you know whether those people really bought it? You'd think it's pretty easy right? If they bought it, there would be a bill of sale. You have that with a car. If we buy property, we have that.
They'll come in with one piece of paper and it says, "The accounts listed in the purchase agreement have been sold, pursuant to the rights listed in the purchase agreement," and it has a signature. They go, "See, this proves we bought it." Really? One piece of paper, you bought $500 million worth of defaulted debt? It doesn't even say how much you paid for it. It references a purchase agreement. They go, "Whoa. You cannot get the purchase agreement. That is the formula to Coke or something. You can't get that." If I'm suing somebody and claiming ownership of a house and that's the issue, do I own the house, I can't say, "I'm not going to give you my deed. I'm not going to show you the mortgage." If you sue, you got to bring proof.
Keep in mind, do not speculate, do not guess, do not make stuff up. They'll bring in an affidavit. First of all, in most courts, affidavits are inappropriate because you can't cross-examine a piece of paper. You can't go, "Mr. Piece of Paper, let me ask you a question." You can't do that. An affidavit is somebody that's saying, "I swear this is the truth and we sold the account to Midland." First of all, we have no idea if that person's telling the truth. Even if they're telling the truth, that person doesn't know if Midland still owns the debt. Maybe I've sold it to Midland and the next day Midland may have sold it to somebody else. Now Midland is suing you.
We've had situations where multiple debt collectors are trying to collect the same debt at the same time. They each say, "I own the debt." You both don't own it. One of you is lying, or maybe both of you are lying. They'll bring these things in and say, "See, this affidavit proves it." I don't know. All it says is somebody claims to have sold the debt to somebody. Where's the purchase agreement? Where's the live witness testifying to them? If you don't speculate, that'll take you really far in this process. If you're in this situation and you want more information, we have some resources that we can make available to you. I'm also happy to talk with you before your trial.
The second thing, and then I'm going to move on, is you've got to look at this and say, "I'm walking into court. That's an unusual situation. How do I handle myself? What will happen?" Here's the simple solution. Go to court. If you've got Judge Amari, or Judge Lowther, or Judge [Alls-berg 00:33:06], or whoever your judge is, call the judge's office and say, "I'm John Watts, I have a small claims trial, I have a district court trial set three weeks from today. I'd like to come watch when you have court." They'll love to have you. It's all open to the public, there's no secret here. You can walk in, you sit there.
It does a couple things. Makes sure you find the courthouse, know where to park, know how to get through security, know which courtroom your judge is in. Because if you skip this step, and then it's your Monday morning at trial or your Thursday afternoon, or whenever your judge does it, and you can't find the courthouse and you're running late. You can't find a parking spot. You're like, "Oh my goodness. I forgot about having to get through security." Then you finally get through there, and you're late, and you go, "Which courtroom is my judge in?" You're going in and out of courtrooms trying to find the right one. That is not a good feeling. Then you walk in late, and the judge is not happy with you, and you're embarrassed, and all your intentions crumble at that point.
Go ahead of time, watch what happens. What you'll notice is the judge will do something called a call of the docket. He'll say, "Midland versus Smith, LVNV versus Jones." Most people that defend themselves don't even show up. The ones that do, they'll go out in the hallway and agree to a judgment with the collection lawyer. You can do that if you want, but I just want you to see this because you'll feel more comfortable having experienced it, and there's no pressure on you when you're just there watching. Make notes so that you'll know what to expect.
Don't go to another judge's courtroom. Go to your judge's courtroom. Every judge is a little different. Some are very formal and some are kind of laid back. Just figure out what's exactly going to happen with your judge in these types of cases. I hope that's helpful to you.
I think we probably have time for maybe one or two more questions.
"Is it too late to undo a foreclosure when I'm sued for an ejectment or an eviction?" I think we talked about what an ejectment case is. You get foreclosed, they tell you to get out of your house. You don't get out. Then they sue you to eject you, or kick you out, or evict you.
The question is, is it too late once I've been sued? The answer is no. You're in a bad spot, but it's not too late. There is hope, there are options for you at least to explore. I can't tell you that you can be successful, but I can tell you that over many, many years, we've represented just dozens, and dozens, and dozens of people who've been foreclosed, they've been sued, we've been able to go through that process, undo that foreclosure, get them back to where they were before the foreclosure, a lot of times with a better deal, and then they go on with their life. Is that easy? No, it's not easy. It's difficult to do. It is possible to do, however.
I would recommend, if you're in that situation, check out our video, our webinar on the five mistakes people make when they're sued in an ejectment action. I think that'll be very helpful to you. Just keep this in mind. Yes, it is possible to undo the foreclosure, even after you've been sued.
Next one we have is, "When does the FDCPA," that's Fair Debt Collection Practices Act, "apply to mortgages?"
This is the law that deals with debt collectors. You have a medical bill, an old credit card debt, you get debt collectors. We don't normally think about mortgage companies as debt collectors.
I was invited to do some training for a nationwide group of foreclosure defense lawyers. My topic was how do we use the Fair Debt Collection Practices Act to help our clients who are either facing foreclosure, or maybe they've already been foreclosed. I got up and I announced it. People were looking at me funny, and somebody raised their hand, and they go, "What are you talking about? That applies to debt collectors, that doesn't apply to mortgage companies." These were really good lawyers, very skilled lawyers from all over the nation, and they had not made the connection that the FDCPA does. I'm not saying nobody has made that connection, but just by and large, even lawyers that defend consumers don't think about the FDCPA.
Let me just tell you when the FDCPA applies -- it is when the debt goes into default and then it gets transferred to the mortgage company.
Imagine this is the note, this is the debt. What we look at is we say when that mortgage company, I don't care if we're talking about somebody buying the debt or servicing the debt, when they first put their hands on it, is the debt in default? If the answer is no, then they're not going to be a debt collector. What if the answer is yes? Then normally, they will be a debt collector.
Courts have struggled with this and defendants are always saying, "Yeah, you were three months late, but you were not in default." It's kind of funny because they're arguing, "You're not in default," because they don't want the FDCPA to apply. Because it gives you tremendous tools if the FDCPA applies, especially if you're dealing with Alabama state law, which has really been cut back in a way that harms consumers, just the way the law is. Under the FDCPA, you have a lot more options.
Here's the definition. If it's in default when that mortgage company gets it, they're a debt collector. What's default? If here is when your payment was due and here is when you sue them, they want to say, "It was somewhere over here that you actually would have been in default." Here's a very simple way to do it. You look at the note and it says default. It says if you do not make your payment by the due date, you're in default.
Mortgage companies and their lawyers go crazy over this. They're like, "That can't be the law," because if you're payment is due on the 1st, and it gets transferred to Wells Fargo on the 6th, and you pay it on the 7th, that can't be default. You know what, it is default. That's what the contract says. We didn't write the contract, the mortgage company wrote the contract. Fannie Mae or Freddie Mac, they wrote the contract. We're just following the contract.
It's funny because these mortgage companies will say ... Let's say you're coming up on a foreclosure, and this is your foreclosure, and you're going to file bankruptcy, and you miss it by one day. You file bankruptcy one day late. They go, "You can't stop the foreclosure, it already happened. You are one day late." You go, "But it was only one day." Or you make your payment one day after the grace period. They go, "Boom, there's a $50 charge." You go, "But it was one day." They go, "Oh no, no. Follow the contract. You agreed to this."
That's all we do with them, is we say, "Hey, mortgage company, you now have this contract and you or your supposed predecessor wrote this contract. It says if you don't pay on the due date, you're in default." Then that's what we're going to do. If we're one day late, we're in default, and then it gets transferred to Bank of America, Wells Fargo, Ocwen, whoever. They're a debt collector now. Almost all of them now, you look at any letters down at the bottom, it'll say, "Please be advised this is an attempt to collect a debt and we are a debt collector."
Very powerful law. You want to notice, if you're dealing with, say, Bank of America, and then it changed over to Cenlar, SPS, Chase, whoever it was, look at when it transferred, were you current or were you behind? Then look at your note. Almost all the notes will say if you're one day late, you're in default. Then the FDCPA is going to apply. They'll fight you like the devil on this because they hate this law, but it's a very powerful law and it's worth that battle.
I think this will be the last one we'll do. This is a case we filed where a debt collector had called our client and said, "I want to make arrangements to settle this." Our client said, "I don't have the money." They said, "We'll pull," I forget what it was, "a hundred bucks out of your account. Then the next month, we want to talk about pulling more money." Our client said, "You can pull it out this month, but come next month, you need to ask me first. Don't just pull it out. I don't know that I can do that." They explained their financial situation.
The debt collector pulled the money out this month, next month our client starts bouncing checks. Why are we bouncing checks? Has the rest of the money gotten pulled out? What in the world? I called the collector, "What is going on?" The collector says, "We had authority to do that." "I didn't give you authority to do it." They say, "We did anyway." I won't get into all the allegations and we'll see how the lawsuit unfolds once we get people swear in under oath, but this is what I wanted to talk to you about.
I get a lawyer that calls me about this. This is not unique to this case. We've had this in other cases. They said, "Look, what's the big deal? We reached into the bank account, we pulled some money out. We had authority to do it." I go, "That's the whole issue. If you did, then fine, but if you had no authority, then that's a really, really big problem for your client," the debt collector.
The reaction over the years has been, "Who cares? How could that possibly hurt your client? Maybe we'll pay for an NSF charge, thirty bucks or whatever. But we're not paying for anything else. Your client can't possibly be hurt." It got me thinking about this.
This wasn't a question submitted for the webinar, but this is something I've heard over and over from collection lawyers and lawyers who defend collection agencies, and it's possible you could be thinking this, if maybe a debt collector's reached in and grabbed your money out without permission, and that is ... This is the illustration I use. What would it be worth in damages, and emotional distress, and punitive damages ... We don't get punitive under the FDCPA, but we get punitive damages, and FDCPA is Fair Debt Collection Practices Act, we get it under state law ... If the debt collector walks up, picks the lock on the door, walks into my client's house, goes to my client's purse, or wallet, or whatever, pulls the money, physically pulls the money out, and leaves?
He's like, "That would be bad." No, that would be horrible. That would be terrible for a debt collector to do that. Think about, what would a jury think, what would a federal judge think if a debt collector went and stole money? Pretty bad, right? It's real bad. There would be a whole lot of damages when somebody reaches in and steals money from you.
Is it any different if instead of walking into my house and doing it, they walk into a bank and do it? If they lie to the bank, and say, "We had permission." What if they walk into the house, and maybe your spouse is there, and they go, "John told me I could come in here." They lie about that and they steal my money. They got a big problem. That's a crime.
Is it any different when they present something electronically to a bank and they lie on that and say, "We had permission to pull this money," and they really don't? Then they reach in and pull that money out. That's some bad, bad stuff. You think about, what's that danger to the community, when you have collectors that can just start reaching in, and grabbing bank accounts, pulling money out, and checks are bounding, and people don't have money. They've been violated, their privacy's been violated. These collectors are like, "What's the big deal? So we took your money. You owed it anyway." I don't really care if I owe it, you can't come into my house and steal my money. You can't reach into my wallet, steal my money, and you can't reach into my bank account and steal my money. There are serious, serious consequences to that.
I just wanted to share that because if you've been in that situation, and you call the collector, and they're like, "What's the big deal? You can't do anything about it." Oh yeah, you can do something about it. It's called a federal court lawsuit, and then let's let a judge, let's let a jury decide, is that bad? Maybe a judge and jury say, "I don't have a problem with it." Okay, but my hunch is most jurors, if they believe that you did not give permission for that debt collector to reach in and take your money, they're going to view that as, "Your money got stolen and that is real, real bad." When they decide, "How do I compensate this consumer? If somebody went in and stole money, violated them, what kind of emotional distress does that cause?" I suggest it's a big number.
Then, from a punitive damages standpoint, two purposes of punitive damages. One, to punish the wrong-doer, and number two, to deter the wrong-doer, the debt collector here, from ever doing this again, and from any other debt collector from doing this. I think, if we got people reaching in there and stealing money, that's a pretty big number. We got to punish people. If I walk into somebody's house and steal their money, I can go to prison for that. I think there's going to be a pretty high damage award on that.
Then, we want all the other debt collectors who watch these trials, because when we try one of these cases, the debt collectors are watching it because very few of these get tried, and if they see this big punitive damage award, they go, "Whoa, whoa. Okay, let's do a quick memo to all the collectors. Stop stealing money. Don't do that. We have to treat people fairly. We can't go steal their money because I don't want to get sued like that." That's the effect of a big punitive damage award.
I hope that this is helpful to you. I hope this whole webinar, again, completely unplanned and may have gone longer than I thought. Still have some questions. We have plenty of questions for Friday, but definitely give us your question. If we start getting a lot more questions, then we'll probably start doing these a couple times a week, or if we have enough, we'll do them every day. Because we're trying to get the message out to consumers, whether you're dealing with long-term care, or debt collectors, or a credit report problem, here's the fundamental philosophy of our firm. You have to know your rights. If you don't know your rights, you can't do anything. That's like getting in a car and going, "I'm just driving. My eyes are closed, I'm just driving. I hope I'll show up at the right place." It's unlikely.
Even if you know your rights, you have to take action. If you know everything in the world to do and you don't do it, it doesn't do you any good to know it. It's like getting in your car and you go, "I know how to get from Birmingham to Chicago," and you never press the gas. You're just sitting there. Nothing's going to happen. You don't want to just step on the gas and have no idea of where you're going. You want both. Know your rights, take action.
The whole point of these webinars is to help you understand what your rights are and at least to raise questions. As you watch this and you go, "I'm going to write down a question. Then when I go meet with a lawyer, I'll have some questions and I'll have a base level of knowledge, or at least I'll know what to ask about in my particular situation."
Again, thanks for being with us and hope this was helpful. If you want to get in touch with us, you can leave a comment below. Don't put anything personal in there. If you have a legal question that you want to ask us, sit down and have a consultation, we do a lot of those by phone, or by video, or in person anywhere in the state, 205-879-2447, or www.AlabamaConsumer.com, or www.AlabamaElderLawyer.com. We'll be more than happy to help any way we can. Hope you have a great day. Thanks for watching this. If you like it, there should be a button to like it or share it, or leave us a comment, and that way we'll know we're doing some good stuff here. Thanks a lot and have a great day. Bye bye.
This case is interesting as it shows the mindset of the debt collection industry in arguing that they can still collect without any penalty even though you send a letter plainly telling them to go away.
We've sued IC System several times and have not detected any change in their attitude.
By the way, if you don't know about Google Scholar, you should check it out. Great free search tool. We use a paid service as we need more details but to just find a case quickly it is hard to beat Google Scholar.....
Enjoy the video above and/or the case text below....
The Court now considers the Motion for Partial Summary Judgment filed by Plaintiffs Jeff Bishop and Heidi Bishop. (Doc. 28.) The Bishops seek summary judgment on one of five claims in Count I of the Amended Complaint against Defendant I.C. System, Inc. for a violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692c(c). I.C. System opposes the motion. (Doc. 32.)
With exceptions, § 1692c(c) prohibits a debt collector from contacting a consumer after being notified in writing that the consumer wishes the debt collector to stop communicating with him. Plaintiff Jeff Bishop argues that I.C. System violated § 1692c(c) because it contacted him after he wrote I.C. System a letter that said: "Any further correspondence from your organization or any other collection agency will be discarded or returned to you unopened." I.C. System contends that a genuine jury issue remains whether Bishop's letter triggered § 1692c(c)'s protection. Because the Court finds that any jury would conclude that the letter demanded that I.C. System stop contacting the Bishops, the Court enters partial summary judgment for the Bishops on this single claim.
In September 2008, Jeff Bishop and his wife Heidi received a telephone call and a letter from I.C. System, a debt collection agency, at their North Carolina home about a debt they allegedly owed to a dentist, Richard Salvatore, in upstate New York. (Doc. 28-1; Doc. 34 at 13-16.) Jeff Bishop said he told the representative from I.C. System that the company had made a mistake. Id. The Bishops had never been to a dentist in upstate New York. They did not know a dentist named Richard Salvatore. And it was impossible for a dentist to work on their son's teeth because at the time of the alleged work, their son was an infant, who had no teeth. Id.
1363*1363 About a month later, I.C. System contacted the Bishops again. (Doc. 28-1; Doc. 34 at 16-24.) This time, I.C. System called the Bishops at home and sent them a letter about a $84 medical bill that the Bishops allegedly owed to doctors at Associates In Pediatrics in Virginia, where the Bishops had previously lived. Id. Jeff Bishop said he told the I.C. System representative that the staff at Associates In Pediatrics had improperly billed their health insurance carrier for flu vaccines for the Bishops' two sons. Once the doctor's office corrected their error, the Bishops' insurance carrier would pay the bill. Id.
Despite this explanation, I.C. System sent Heidi Bishop a collection letter on October 20, 2008 and again on November 24, 2008. (Docs. 28-2, 28-3). Jeff Bishop said he also received more phone calls from I.C. System representatives. During one of those calls, Jeff Bishop said he asked the I.C. System representative to stop calling him. (Doc. 34 at 23.) According to Bishop, the representative told him that I.C. System would continue to call until he placed his request to cease communication in writing. Id. On November 28, 2008, Bishop wrote a manager at I.C. System's headquarters in St. Paul, Minneapolis this letter:
I am returning your September 30, 2008, October 20, 2008 and November 24, 2008 letters for you to recycle. As we have repeatedly pointed out to Associates in Pediatrics, Heidi long ago paid them every penny that she legitimately owes, which is nothing. Copayments were paid at the time services were rendered, and all other charges were covered by not one but two health insurance companies, which Associates's staff has still failed to appropriately bill despite having the issue repeatedly explained to them over the phone. Their continuing failure to perform such a basic function of their job as to properly bill insurance companies reflects a level of incompetence matched only by your own in attempting to collect another nonexistent debt on behalf of a certain Richard Salvatore, a dentist none of us have ever seen, in a state where none of us have ever resided, for dental services rendered to a then-infant who didn't even have teeth at the time.
In the highly unlikely event that Associates believes they have a non-frivolous claim for $84 or any other amount, it is up to them to contact us directly and explain why. Any further correspondence from your organization or any other collection agency will be discarded or returned to you unopened.
(Doc. 28-4) (emphasis in original).
On January 2, 2009, Heidi Bishop received another letter from I.C. System about the same $84 bill. (Doc. 28-6.) According to Jeff Bishop, representatives from I.C. System continued to call the Bishops at home. (Doc. 28-1.) The calls came on January 26, February 4, February 5, February 9, and other unspecified dates in 2009. Id. On January 9, 2009, Jeff Bishop said he called I.C. System to find out whether they had received his November 28 letter. They had, Bishop said. But Bishop said the I.C. System representative told him that the company would continue to call him until the Bishops provided proof that they did not owe the $84 debt. Id.
On March 25, 2009, the Bishops sued I.C. System in the 13th Judicial Circuit of 1364*1364 Florida. The Complaint was removed to federal court and then amended. (Docs. 1, 17.) The Amended Complaint alleges that I.C. System violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., (Count One), the Florida Consumer Collection Practices Act ("FCCPA"), Fla. Stat. § 559.72, (Count Two), and committed the common law tort of invasion of privacy by intruding upon the Bishops' seclusion (Count Three). Within Count One, the Bishops make four claims that I.C. System violated four separate provisions of the FDCPA: § 1692c(c), § 1692e(10), § 1692e(2)(a), and § 1692d(6).
In the § 1692c(c) claim, the Bishops allege that I.C. System continued to communicate with the Bishops after Jeff Bishop notified the debt collector in writing that the Bishops refused to pay the debt or wished I.C. System to cease further communication with them. The Bishops seek the maximum statutory damages of $1,000, actual compensatory damages, damages for emotional and mental anguish, and attorney's fees and costs.
The Bishops now move for partial summary judgment on the § 1692c(c) claim in Count One. I.C. System opposes the motion, and, in its response, urges the Court to enter partial summary judgment in its favor on this claim. I.C. System, however, did not move for summary judgment, and therefore, as the Court instructed I.C. System recently in another FDCPA case, the Court cannot grant summary judgment to I.C. System on any claim when it does not file a separate motion for summary judgment.
STANDARD OF REVIEW
Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court must draw all inferences from the evidence in the light most favorable to the non-movant and resolve all reasonable doubts in that party's favor. Therefore, the moving party bears the initial burden of showing the Court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial. Id. When the moving party has discharged its burden, the non-movant must then go beyond the pleadings, and by her own affidavits, or by depositions, answers to interrogatories, and admissions on file, designate specific facts showing there is a genuine issue of material fact for trial. Id.
"Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." In determining whether there is a "genuine" issue, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." In addition, a dispute 1365*1365 about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." However, "[t]he mere existence of a scintilla of evidence in support of the Plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]."
A. No Genuine Issue of Material Fact Remains on the § 1692c(c) Claim
Section 1692c(c) of the Federal Debt Collection Practices Act says: "If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt. . . ." The statute then provides three exceptions, none of which are relevant here.
1. Undisputed Material Facts
The following facts are undisputed:
The parties do not dispute that both Plaintiffs are "consumers," as defined by 15 U.S.C. § 1692a(3). While it may be unclear whether only Heidi Bishop—as opposed to her husband, Jeff—was the "consumer" allegedly obligated to pay the $84 debt, any dispute about this issue is not material. Section 15 U.S.C. § 1692c(d) defines "consumer" broadly to include the consumer's spouse. While the Bishops later filed for divorce, it is undisputed that they were married at the time of I.C. System's alleged violations. (Doc. 34 at 6-7.)
Second, the parties do not dispute that the Bishops allegedly owed a "debt," as defined by 15 U.S.C. § 1692a(5). I.C. System contacted the Bishops to get them to pay a doctor's bill for services rendered by Associates In Pediatrics. Payment to a doctor's office for a flu vaccine for children is an obligation arising out of a transaction for services for personal, family, or household purposes, and therefore, is a "debt" under § 1692a(5).
Third, the parties do not dispute that I.C. System is a "debt collector," as defined by 15 U.S.C. § 1692a(6). Although I.C. System denied in its Answer to the Amended Complaint that it was a "debt collector," it does not dispute this material fact in its response to the partial summary judgment motion. Therefore, I.C. System has waived this defense.
Fourth, the parties do not dispute that Jeff Bishop sent I.C. System the November 28, 2008 letter, in which he wrote, 1366*1366 "Any further correspondence from your organization or any other collection agency will be discarded or returned to you unopened." The parties also do not dispute that I.C. System received this letter. Under § 1692c(c), notification to the debt collector is "complete upon receipt." Aside from the fact that I.C. System does not dispute that it received the letter, the Bishops also offer evidence from I.C. System's internal records that show that the company received the letter. (Doc. 28-5.)
Fifth, the parties do not dispute the fact that I.C. System contacted the Bishops by mail and by phone on more than one occasion about the $84 debt after it received Jeff Bishop's November 28 letter. While the parties may dispute the exact number of telephone calls made, this dispute is not material to the Bishops' § 1692c(c) claim as long as more than one contact occurred. Even after a debt collector receives a consumer's cease-and-desist letter, the FDCPA allows the debt collector to contact the consumer one more time for specific purposes. Because the parties do not dispute that I.C. System contacted the Bishops at least twice, any dispute about the exact number of calls is not material to the § 1692c(c) claim. I.C. System also does claim that its communications fall within the statute's exceptions.
Sixth, the parties do not dispute that I.C. System's calls and its letter to the Bishops after November 28 concerned the $84 debt described in Bishop's letter. Even after a debt collector receives a consumer's cease-and-desist letter, the FDCPA allows the debt collector to contact the consumer about other debts or future debts. In addition, a debt collector may contact a consumer if the contacts do not constitute "communications" about a debt as defined by § 1692a(2). I.C. System does not dispute that its calls constituted "communications." Nor does it contend that its calls were about some other matter besides the $84 debt.
I.C. System also failed to raise other defenses that would create a genuine issue of material fact for a jury to resolve. For instance, while I.C. System raised the bona fide error defense in its Answer, it did not assert this defense in its response to the partial summary judgment motion. I.C. System also makes no argument that Jeff Bishop waived the protections of § 1692c(c) by calling I.C. System on January 9 after he had sent his November 28 letter.
2. Sufficiency of Bishop's November 28 Letter
Instead, I.C. System's argument focuses on one issue. It argues that Bishop's November 1367*1367 28 letter did not satisfy the statute's requirement that the consumer notify the debt collector that he wishes "the debt collector to cease further communication." I.C. System argues that because Bishop did not ask I.C. System to stop contacting his family, I.C. System was free to keep communicating with them.
I.C. System's argument rests on the fact that Bishop's letter did not include the actual words of the statute and did not literally say, "Cease further communication." But while Bishop did not use those precise words, his words expressed the same message—just with more bite. In the last paragraph, Bishop wrote that Associates In Pediatrics could contact them directly about a non-frivolous claim. By informing I.C. System that only Associates In Pediatric could contact them, Bishop was also telling I.C. System not to communicate with them. The letter also ends with Bishop writing that future correspondence from I.C. System would be discarded or returned unopened. This sentence would indicate to any reader that Bishop did not want to receive any more mail from I.C. System.
The fact that the letter does not literally ask I.C. System to cease communication does not deprive the letter of its plain meaning. As Judge Learned Hand famously said, "There is no surer way to misread any document than to read it literally." The context of Bishop's letter makes it clear that he and his wife did not want to be disturbed by I.C. System any more. In addition, the sarcastic and insulting tone of the letter makes Bishop's request more clear-not less clear, as I.C. System contends.
Generally, when parties disagree about the inferences to be drawn from a material document, a jury should decide what inferences to make. But to send a matter to a jury, the disagreement must be reasonable. A dispute is not "genuine" if it rests merely on a "metaphysical doubt" about the meaning of a word. In this case, no reasonable disagreement exists about the inferences to be drawn from Bishop's letter. While lawyers may parse the meaning of any word into bits, no reasonable jury would stumble over what Bishop communicated in his letter. Context and common sense make the message clear. Bishop wanted I.C. System to leave him and his wife alone.
I.C. System does not address whether or not Bishop's letter notified it that the Bishops refused to pay the $84 bill. This is an important oversight. Section 1692c(c) can be triggered if the consumer notifies the debt collector either that they refuse to pay the debt or that they wish the debt collector to cease communication about the debt. In his November 28 letter, Bishop clearly refused to pay the $84 bill. He wrote that his wife "long ago paid [Associates In Pediatrics] every penny that she legitimately owes, which is nothing." (Doc. 28-4.) Later in the letter, Bishop left open the possibility that he might reconsider his refusal to pay the debt if Associates In Pediatrics contacted him directly with a non-frivolous claim. But possible reconsideration does not make his refusal any less clear.
1368*1368 The parties also argue over whether the Court should apply the "least sophisticated consumer" standard to this dispute. We do not need to reach this issue, however, because we find that under any standard, a consumer who wrote a letter like Bishop's would have effectively communicated their wish that the debt collector stop contacting them, triggering § 1692c(c).
Neither party argues that the statute imposes a heightened standard on the consumer who seeks to stop a debt collector's calls and letters. The statute does not require that the consumer use any specific language or "magic words" to tell a debt collector to cease communication. A rigid requirement would not make sense given the statute's remedial nature and its purpose to protect the public.
B. The Court will Defer Ruling on Damages
The Bishops seek statutory damages, actual compensatory damages, damages for emotional and mental anguish, and attorney's fees and costs.
Section § 1692k allows a court to award a maximum of $1,000 in statutory damages per lawsuit, regardless of how many times a defendant violates the FDCPA. When setting the amount of statutory damages, § 1692k(b) requires a district court to consider (1) the frequency and persistence of the debt collector's non-compliance with the law, (2) the nature of the non-compliance, and (3) the extent to which the collector intentionally did not comply with the law. Because the Court cannot consider these factors on this record, it will defer ruling on damages, including the amount of statutory damages.
The Court will either submit this issue to the jury if this case proceeds to trial in July, or it will conduct a hearing on damages if the parties dispose of the remaining claims without settling this issue.
For similar reasons, the Court will defer ruling on the Bishops' request for other damages and for attorney's fees and costs.
Therefore, Plaintiffs' Motion for Partial Summary Judgment (Doc. 28) is GRANTED.
Because other claims remain, the parties must submit a joint pretrial statement to the Court by May 27, 2010. The Pretrial Conference is set at 8:30 a.m. on June 2, 2010 in Courtroom 14A of the Sam M. 1369*1369 Gibbons U.S. Courthouse in Tampa, Florida.
IT IS SO ORDERED.
 The Court includes this background only to provide context for its Order. By laying out this summary, the Court makes no findings of fact. Summary judgment requires that the Court view all facts and draw all reasonable inferences in the light most favorable to the non-moving party, in this case I.C. System.
 In a deposition, Jeff Bishop estimated that he spoke to an I.C. System representative on the phone about a dozen times. But he could not state the number of times with certainty, except to state that there were more than five phone conversations. "If I were to pick a wild number, I'd probably say about a dozen," Bishop testified. (Doc. 34 at 25.)
 See Casey v. I.C. System, Inc., No. 8:09-cv-210-T-24-TBM, 2010 WL 415310, at *1 n. 2 (M.D.Fla. Jan. 29, 2010). In an endorsed order in this case, the Court also instructed I.C. System that if it wished to file a cross motion for summary judgment, it should seek leave under Rule 6(b) of the Federal Rules of Civil Procedure to do so. (Doc. 33.) The Court also notes, as it did in Casey, that because I.C. System did not move for summary judgment on the invasion of privacy claim, that claim remains before the Court. Casey, 2010 WL 415310, at *1 n. 1.
 Porter v. Ray, 461 F.3d 1315, 1320 (11th Cir.2006).
 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
 Id. at 251-52, 106 S.Ct. 2505.
 Id. at 248, 106 S.Ct. 2505.
 Id. at 249-50, 106 S.Ct. 2505.
 Id. at 252, 106 S.Ct. 2505.
 "The term `consumer' means any natural person obligated or allegedly obligated to pay any debt." 15 U.S.C. § 1692a(3).
 "The term `debt' means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C. 1692a(5).
 "The term `debt collector' means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6) (exclusions omitted).
 Doc. 20.
 In addition, "there is a presumption that `every letter, properly addressed and stamped, is duly transported and delivered to the addressee.'" McGrady v. Nissan Motor Acceptance Corp., 40 F.Supp.2d 1323, 1337 (M.D.Ala.1998) (internal citations omitted).
 "The term `communication' means the conveying of information regarding a debt directly or indirectly to any person through any medium." 15 U.S.C. § 1692a(2). See also Ramirez v. Apex Fin. Mgmt., LLC, 567 F.Supp.2d 1035, 1040-42 (N.D.Ill.2008).
 While the Eleventh Circuit has not spoken on whether a consumer can waive his rights under § 1692c(c), the Ninth Circuit has found that a consumer who asks the debt collector in writing to cease communication, but then later contacts the debt collector anyway, can waive under certain circumstances the protection of § 1692c(c). Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1170-71 (9th Cir.2006) (applying the "least sophisticated debtor standard" to evaluate whether debtor would have understood she was waiving her rights).
 Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
 The FDCPA does not define "refuse," but its ordinary meaning does not encompass an unalterable rejection. Refuse means "to decline to do, accept, give, or allow." Webster's II New Riverside University Dictionary 989 (1988).
 Although the Ninth Circuit in Clark v. Capital Credit and Collection Services, Inc., 460 F.3d 1162, 1170-71 (9th Cir.2006), applied the "least sophisticated consumer" standard to a consumer's conduct under § 1692c(c), the Eleventh Circuit has not done so. The Eleventh Circuit has applied the standard in § 1692e(10), § 1692(d), and § 1692(f) cases. See Jeter, 760 F.2d at 1176; LeBlanc v. Unifund CCR Partners, ZB, 601 F.3d 1185 (11th Cir.2010) (decided March 30, 2010). Given the gap in the case law, it is not clear that the "least sophisticated consumer" should apply in this context. Normally, courts apply this standard to determine whether the "least sophisticated consumer" would be deceived by a debt collector's actions. Here, we are evaluating the consumer's—not the debt collector's—actions.
 LeBlanc, 601 F.3d at 1194-95 (11th Cir. 2010) (discussing Congress' purpose to protect consumers in enacting the FDCPA).
 15 U.S.C. § 1692k(a). See also Harper v. Better Business Services, Inc., 961 F.2d 1561, 1563 (11th Cir.1992) ("The FDCPA does not on its face authorize additional statutory damages of $1,000 per violation of the statute, of $1,000 per improper communication, or of $1,000 per alleged debt. If Congress had intended such limitations, it could have used that terminology. . . . Congress instead chose to write that additional damages would be limited to $1,000 per [`action.']").
 15 U.S.C. § 1692k(b).
 See Sibley v. Fulton DeKalb Collection Serv., 677 F.2d 830, 832-33 (11th Cir.1982).
This is the first one of our weekly question and answer webinars.
Here's the transcription with some of my sloppy words cleaned up. :)
Well, hello and welcome to our first question and answer webinar. We're going to do these about every Friday or so. The purpose of these webinars will be so that you can ask questions. If you're on this live, of course, you can ask them. If you are not live on this or you want to submit questions at a time that's convenient to you, you can always email me: email@example.com. We have a number of those questions that have been submitted already. Probably, unless we have somebody that has a question right now, we'll just go through these previous questions.
The idea is you can ask about consumer protection issues. That can be things like credit reports, debt collectors, mortgages, foreclosures, being sued by a debt collector, also, elder law or estate planning issues. What's a will? What's a trust? What's a special needs trust? How do I qualify for Medicaid in Alabama. Things of that nature. We'll go ahead and get started. I'm not sure exactly how long these will last. Maybe 30 minutes, maybe longer. We'll just start going through some questions.
First question I have is, somebody had written in, "What's the process of a short sale?" This is when you're facing a foreclosure and you're wanting to avoid that foreclosure. There's something called a "short sale." A short sale is where you agree with the bank to sell your house for less than what you owe. Let's say you owe $200,000, you get an offer for $180,000.
That's $20,000 short. You either have to come to the closing table with 20 grand or you get your mortgage company to agree to allow this short sale to occur.
The advantage of this is it prevents a foreclosure because you've actually sold your house.
The downside is, you have to get your mortgage company to agree to do this and sometimes that's a little difficult to do. You also have to wonder, are they going to come after me for that deficiency or that shortness, if you will? That 20,000 in my example. If they will do that, then you've got to decide, is this worth it?
A lot of times, you can get them to agree to waive that or just not come after you for that. You also need know, how will this be reflected on your credit report? A number of issues to look at but a short sale can be a very valuable alternative to foreclosure.
This is what, broadly speaking, is called, "loss-mitigation." That can be a loan modification, a deed in lieu of foreclosure, or a short sale. There's other things but for our purposes, just talking about a short sale right now.
Typically, the process will be that you have to try to sell your house with a licensed realtor and then when that's not successful, then they'll let you lower the price so that it'll be a short sale. Then, once you get an offer, then you've got to get the servicer to approve it and oftentimes, the investor. That could be Freddie Mac, Fannie Mae, it could be some trust that's out there. You've got to get those guys to approve it and then, ultimately, there's paperwork. A lot involved in it, but if you are facing a foreclosure and you're trying to avoid it, then a short sale's certainly an option to look into.
Next question we have is: “Can a debt collector be accountable for causing your credit score to drop by reporting inaccurate information?” The answer to that is absolutely.
There's really two laws at play. One is the Fair Debt Collection Practices Act and the other is Fair Credit Reporting Act. If a debt collector is reporting false information and they know it or they should know it, that's going to violate the FDCPA (Fair Debt Collection Practices Act).
This is assuming the debt collector is subject to that law. It's a consumer debt, so not a business type debt. You're dealing with an actual debt collector, so not the original creditor. Then they violate the law, which if they're reporting false information and they know it or they should know it, then that's going to be a violation of the law.
Then, there's also this thing called the Fair Credit Reporting Act (FCRA). You get your credit report, you look at it. You say, "Wait a minute, I don't owe this debt collector $5,000. I settled with them two years ago for $3,000. I own them zero, but they're reporting I owe two or maybe they're reporting I owe the whole $5,000.”
That's going to be false credit reporting. It violates the Fair Debt Collection Practices Act, but under the Fair Credit Reporting Act, you can dispute that through the credit bureaus. You give them the proper proof and they have an obligation to investigate. That includes going to the debt collector, if they need to.
You may send them enough information that the credit bureau says, "We're fine. We don't have to talk to the debt collector." If they do talk to the debt collector and the debt collector says, "Oh no, keep that on their credit report," then that's a violation of the Fair Credit Reporting Act. If you've given enough information to the credit bureau and they keep it, then that will violate the FCRA on behalf of the credit bureau as well. Those are places like Equifax, Experian, and TransUnion. If there is a violation of the law, typically the best approach is to sue in federal court and you get money damages if you're successful. That tends to prompt these guys quickly to fix your credit when they realize that you've sued them in federal court.
Our next question is, “Will an inheritance to my disabled daughter on SSI and Medicaid jeopardize her benefits?” What this is talking about is, let's say your daughter has a disability and she's drawing SSI, not Social Security Disability Income but the Supplemental Security Income. That is what is called a means-based or means-tested benefit. You have to meet certain requirements on income and assets to qualify. Same thing with Medicaid.
What do you do though if you're daughter is set to receive an inheritance? Maybe a grandparent, an aunt, and uncle, somebody is leaving money to your daughter who's on SSI and on Medicaid, is that going to jeopardize her benefits?
The answer is, probably it will. Normally, on those benefits, your daughter can only have $2,000 in assets. Unless it's a very small inheritance, that's going to push her over that $2,000 limit. That's going to be a problem as far as staying qualified for SSI, staying qualified for Medicaid. That might be incredibly important to keep those benefits. So, what do we do?
Typically, what we do is we set up what's called, "The Special Needs Trust." Imagine a box and we put that inheritance into the box. That way, it's not considered your daughter's money. It's owned by that Special Needs Trust or that box. There are very specific rules for how we reach into that box and pull out money to benefit your daughter. Normally, we cannot replace benefits that are already provided by SSI or Medicaid, but we can do things to supplement. For example, maybe eyeglasses are not covered or maybe certain dental work is not covered by these government benefits. We may be able to then, reach into that box, pull out money to take care of that. Again, very specific rules on this but just to answer this, hopefully quickly here, yes, an inheritance or other money going to your daughter who's on SSI, Medicaid can very well jeopardize those benefits. You want to sit down with a lawyer. Find out, does it make sense to do a Special Needs Trust? If it does, how do we do that process?
Our next question is related to this. “Will an inheritance to someone on SSDI, that's the Social Security Disability Income, and Medicare, so not Medicaid, but Medicare, will that jeopardize their benefits?” The answer to that is typically no.
If we have someone that's receiving Social Security Disability Income. They've worked, they've now become disabled and they're getting this money in from Social Security, then that is not means-based or means-tested. It's just a matter of, did you have enough work quarters or credits or whatever Social Security calls it? Do you meet the definition of disability? Okay, you get this money.
Whether you get an inheritance or not, doesn't have anything to do with that.
This question is on Medicare, which again, is typically not means-tested. You qualify for Medicare based on your age or certain health issues and doesn't really have anything to do with the amount of money that you make or the amount of assets that you have.
Another question we have is, “What is the change that the VA is trying to make on the VA pension or what is know as Aid & Attendance?”
This is a benefit that, for a married veteran, what's called a war-time veteran, can mean up to $25,000 a year tax free. You use that money to pay for long-term care. That can be care at home, in an assisted living facility, or even in a nursing home. Right now, there is no what's called, "Look-Back Period," where if we apply right now, does the VA look back in time and say, "Did you give away any assets?" Right now, there is no such period, but the VA is trying to create that look-back period.
Earlier this year, they said, "This is what we're doing. We're changing the rules." Whether they can do that or not is for a different video. They gave an open period until March to comment on that. In our experience, even though it's now May, we're not seeing them apply these rules. I think that's because there are so many problems with these rules where, I think the VA maybe didn't think it through clearly what they were saying.
I'll give you just one example. They say, "If you give anything to a trust, then we're going to penalize you." We apply now, we look back in time and their proposal is three years. If we gave anything away, they're going to penalize us or punish us going forward. They say, "If you give anything away to a trust, we'll penalize you."
Very simple example. Say a veteran, married veteran, they meet the military requirements, the disability requirements, the financial requirements, income and assets, they have $40,000 in assets. Two and a half years ago, they set up for estate planning purposes, a Revocable Living Trust. That's a trust, a box, we put stuff in. It's still considered ours for all intents and purposes. A veteran does that, they're in perfect health, and now they've had a stroke and they need this VA pension. The VA would say, "Aha, you gave away assets. That's a problem. We're going to penalize you." Well, that still would be considered our assets and maybe it's a house we put in plus $40,000. Normally, the house doesn't count as an asset but now, since we transferred into this Revocable Living Trust which really does nothing in terms of ownership, the VA's going to say, "Now we're going to penalize you."
That just wasn't well-thought out. That's not what the VA means, but that's what they wrote. But the VA is trying to change the rules. Anyway, here's the bottom line. If you think you might qualify for this benefit, you need to get with a lawyer right away because you may need to take action now before the new Look-Back Period and other changes to the law come into play.
On any of these, if we can help you, if you live in Alabama or this is about a family member in Alabama, you can always reach us at 205-879-2447 or you can go to www.AlabamaConsumer.com. That's our website for consumer issues. Or www.AlabamaElderLawyer.com and that's estate planning or elder law issues.
I think we've got time for maybe one more question. This has to do with being sued by a debt collector. Our courts, particularly what's called Small Claims & District Court, they are just dominated by these lawsuits. Some of these debt buyers, debt collectors file a hundred lawsuits in Alabama a week. Just one debt collector files a hundred a week. Another debt collector files a hundred a week.
The question is, “What should I do when a debt collector sues me and they leave the summons, that's the legal document that says, ‘All right, you've been sued and here's your time period to respond, Small Claims Court, 14 days, District Court, 14 days, Circuit Court, 30 days.’ The question is, if I've been sued and I get the summons, but they leave it on my door or they just throw it on my porch, throw it in my yard, am I considered served?”
I'll tell you this, I think from a technical, legal standpoint, if they simply leave it on your porch, then I don't think that's being served. What the rules talk about is leaving it with a person who lives in your house, an adult who lives in your house. That could be a spouse, a child, a roommate, as long as they live in your house. The rules don't talk about throwing it in the bushes or taping it to your door.
I'll give you the practical side. If you know you've been sued, then there's really no benefit in my opinion to just waiting around saying, "Well, you technically didn't serve me. I'm just going to wait until you serve me." My approach is to say, "When these debt collectors sue us, instead of backing up and we're scared and we're going to wait -- No, let's go forward instead. Let's charge these guys. Let's get in there, let's respond to the lawsuit. Let's get a trial date and let's win the case because the sooner we win the case, the sooner we have options against these debt collectors. “
Right now, as I'm recording this, it's May 15 and we have, I think ten Federal Court lawsuits against Midland Funding (a prominent debt buyer) that are pending, active cases right now. I've got another one we're filing. We've got, I think two Federal Court lawsuits against Asset Acceptance and then we have some other cases out there. These all arise out of when consumers were sued by Midland, sued by Asset Acceptance, Portfolio, whoever it may be and the consumer won that case. We want to get to that trial to win that case.
You do have five options when you're sued by a debt collector:
**fight the lawsuit on your own,
**settle the lawsuit on your own,
**hire a lawyer to fight the lawsuit,
**hire a lawyer to settle the lawsuit.
We have an entire video webinar on these 5 options when sued. I think it's like an hour and twenty minutes long. We go over these options. Then we answer a bunch of questions that come up over and over and over, so we went ahead and put those in there.
Just in terms of service of process, if it's just stuck on your door, thrown in the bushes, thrown in the front yard, the front porch and we see that all the time, that's normally not considered good service. I would just be very careful about saying, "What, hey, you didn't serve me. I'm not going to even pay attention to this," because the court might mistakenly believe that you've been served and then those days start counting. When you run out of days, 14 for Small Claims or District Court, 30 for Circuit Court, then the debt collector says, "Hey Judge, we served him. He didn't answer. Give us a default judgment." That's signed and now you have a judgment against you.
If you weren't properly served, you can undo that and we have had situations where clients have hire us and they find out they had a judgment from 14, 15 years ago and we've been able to get those set aside because if you're not properly served, the lawsuit's no good against you. You can do that, but there's expense in it, there's time and the judge may say, "No." My thought is, if you know you've been sued, then go ahead and figure out your options.
If you call the office, typically you want to ask for Carolyn and tell her what's happening and what your situation is. Then, she'll either get back with me and see what we can do or if it's certain types of cases, and she knows, she's been working with us a long time, when to go ahead and set up an appointment. It can be in person, it can be by phone, it can be by video, whatever is most convenient. We'll be happy to help you anyway we can.
I appreciate you watching this and if you have questions, we'll do this again next Friday and we'll get the exact time that we're going to do this and send that out to you. If you're interested, just contact us through one of our websites or you can email me firstname.lastname@example.org. Thanks a lot. Have a great day. Bye-bye.
John G. Watts
Watts & Herring, LLC
Birmingham and Madison Alabama offices (we represent folks all over Alabama)
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