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