Alabama Consumer Law Blog

The New York Times has posted an article that discusses how the credit bureau system- whose reports influence everything from your mortgage approval to a potential job offer- actually has two different systems in place: one for the rich people with connections and another for everybody else.

TransUnion, Equifax, and Experian, three of the major credit bureaus, all keep a "V.I.P. list of sorts" that includes judges, celebrities, politicians, and other people who have influence. The people on this list get special help when it comes to fixing problems with their credit reports. The error is usually corrected immediately, and the person will probably never realize they are on a special V.I.P list.

When asked about a V.I.P. list, a representative from TransUnion said that all consumers “have the ability to speak to a live representative.” Equifax said that all consumers who received a copy of their credit report were given a number to contact customer service. Experian denied any such list exists, but a spokeswoman did say that "high risk people," such as politicians during an election year, will have their credit reports taken offline so that there wouldn't be any unauthorized access to it. Experian insisted that they didn't give special treatment to anybody.

Experian is actually the only credit bureau in the US that still processes credit report disputes. All the disputes go through the same online channels unless that dispute involves a V.I.P., according to consumer lawyers.

“They get a lot more high-end treatment,” said Mr. Szwak, the lawyer, who has read the bureaus’ internal procedure manuals and deposed or cross-examined employees. The biggest difference at TransUnion and Equifax, lawyers said, is that V.I.P.’s disputes are specially handled domestically. Regular consumers’ files, meanwhile, may get priority treatment if they involve a time-sensitive issue, like a mortgage pending, or if the consumer is represented by a lawyer or dealing with fraud

For everybody else, complaints about credit report problems are recorded by an automated system and are given to a subcontractor, who is usually outsourced overseas, who spends an average of 2 minutes figuring out the problem and assigning it a computer code and then refers it to the creditor to investigate. Consumer advocates say that usually when the creditor investigates the problem, faulty record keeping is usually to blame.

“The legal responsibility of the credit reporting agencies and of the creditors is well established,” said Leonard Bennett, a consumer lawyer in Newport News, Va. “There is a requirement that they do meaningful research and analysis, and it is almost never done.”

When a consumer's credit report problem isn't resolved through the bureau's investigation, you can find yourself stuck in a rut with no progress being made. It can feel like the only way to progress and remedy the error is to take the case to court. The credit bureaus have grown much more powerful in the past few decades since a good credit score has become crucial in so many aspects of consumers' lives. The credit bureaus have the power to determine a credit score and federal regulations hasn't really kept up with this growing power. The Federal Trade commission is supposed to oversee the credit bureaus, but it lacks the "broad authority" to do so.

However, that could change once the Consumer Financial Protection Bureau is given control over the credit bureaus instead of the FTC. The switch would enable the CFPB to create new rules and better examine the bureaus' policies. Until the switch happens, the bureaus don't have any economic motivation to change their policies or procedures because their customers are creditors and not consumers.

“There is no neutrality in the credit reporting agencies,” said John Ulzheimer, who has been an expert witness in more than 80 credit-related cases and is president of consumer education at SmartCredit.com. “They work for the lenders who buy credit reports from them, and anyone who suggests otherwise is not being intellectually honest.”

Estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. A recent study, paid for by the Consumer Data Industry Association, the trade group for the bureaus, found potential errors in 19.2 percent of reports, but said that less than 1 percent of them had disputes that, when settled, resulted in a meaningful increase in scores. Even 1 percent translates into millions of consumers, since there are at least 200 million files at each of the bureaus.

New rules went into effect last year to tighten regulations about the accuracy of credit reports. The new rules include allowing consumers to directly dispute errors with the creditor, but some people say the new rule doesn't have any practicality as consumers don't have the legal right to sue companies...but they can sue a credit bureau or creditor.

If you have had problems with credit reporting errors and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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The Kentucky Bankruptcy Blog has posted an article that discusses how some debts aren't dischargeable under bankruptcy, except under special circumstances. For example, student loans, income tax debt, and child support payments are common types of debt that cannot be easily discharged.

The rules surrounding the discharging of income tax debt can be very tricky. How much of the debt that can be discharged largely depends on what type of bankruptcy has been filed for. Chapter 7 and Chapter 13 each have different stipulations.

Ms. Julie O'Bryan, author of the blog, says that:

An income tax debt arises from a tax return for a particular tax year. In general, an income tax debt for a particular tax year may be discharged if the following criteria are met:

The due date for filing the tax return was at least three years prior to the bankruptcy filing date. This due date includes any extensions.
The tax return was filed at least two years prior to the bankruptcy filing. This date is the time the return was actually filed with the IRS.
A tax assessment was made at least 240 days prior to the bankruptcy filing. The tax assessment is usually measured from the IRS proposed assessment sent to the taxpayer.
The tax return was not fraudulent, and the taxpayer has not attempted to evade the tax laws. Dishonest taxpayers do not receive the benefits of the bankruptcy laws.

Any taxes that don't fall under the guidelines listed above will not be discharged in bankruptcy, including unfiled tax returns. When an income tax debt becomes discharged, any corresponding tax penalty is also discharged too. However, in a Chapter 7 bankruptcy filing, a tax penalty is discharged as long as it and the corresponding tax debt are less than 3 years old. In a Chapter 13 filing, all unsecured tax penalties are treated as any other debt during the time indicated in the bankruptcy repayment plan. The Chapter 13 prevents any new tax penalties from forming.

The federal bankruptcy laws contain specific provisions for discharging income tax debt. Bankruptcy can provide you with time to repay your obligation, without the threat of IRS seizure or garnishment; or, in some circumstances, can permanently discharge your tax debt.

Before you decide to file for bankruptcy, it's imperative that you consult with an attorney. If you have further questions or concerns about bankruptcy, feel free to contact us through our website or by calling 205-879-2447.

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We receive many calls and emails about collection abuse but before we get into the details of any situation we first have to ask ourselves "Does the FDPCA (Fair Debt Collection Practices Act) even apply?"

It may be a terrible case of collection abuse but if the FDCPA doesn't apply then . . . well . . . it is not a violation of the FDCPA.

It may violate some other law but not the FDCPA.

So, when does the FDCPA apply? There are four requirements.

Please note these are not "suggestions" or "it would be nice if they apply" -- instead these four items must be present or there is no FDCPA claim.

1. Consumer
2. Consumer debt
3. Debt Collector
4. Violation of the FDCPA by the Collector

Here is a quick overview of these requirements:

Consumer
This simply means you are a human being. :) Not a corporation. Not a partnership. So if a collector has been abusive towards a business or trade association or partnership, then normally the FDCPA would not apply. Instead the FDCPA protects people from abuse.

Consumer Debt
This means personal or household debt. This is for food or medical bills or gifts or gas in your car, etc. It does not include business debt. This can sometimes get a little challenging to figure out but at least at a surface level we are looking at "Was the debt one that you intended to incur for personal or family or household reasons or was it for business purposes (either your own business or your employer)?"

Debt Collector
This means a company who either is collecting for another company or a company that has bought the debt. There are a number of factors involved but the critical one for our purposes in an overview discussion is "Was the debt in default when the alleged collection agency received the debt?"

So, a collection agency that receives your medical bill after it is late will normally be a debt collector. A collection lawfirm that receives your old credit card after you are months behind on it will also normally be a debt collector as will a "debt buyer" who buys the same debt two years after you stopped paying.

A mortgage servicing company such as LPP, BAC, PHH, Chase, Wells Fargo, etc. that does not own the loan but is "servicing it" -- collecting payments, handling escrow, etc -- is a debt collector . . . if it received the loan when the loan was in default.

Approaching it from the other direction, the original creditor is not a debt collector because the debt is the original creditor's own debt and it necessarily did not receive the debt when it was in default -- the debt was current when the debt was taken out . . . .

Violation of the FDCPA by the Collector
The FDCPA lists a number of prohibited actions. Sometimes you have to combine various sections to get the full picture.

As a short hand, our good friend and phenomenal FDCPA attorney Pete Barry has described the FDCPA violations in four categories:

**Being untruthful in collecting the debt;
**Being unfair in collecting the debt;
**Treating you with a lack of respect; and
**Treating you with a lack of dignity.

That's a really good summary and captures the essence of the types of collection conduct that the FDCPA prohibits.

Conclusion
We will circle back around and cover some of these in more detail but we hope that this overview is helpful to you.

If you live in Alabama and have any questions about collectors, or if you would like our free book on stopping abusive collectors, call us at 205-879-2447 or contact us through the contact page of our website. If you live outside of Alabama, feel free to go to NACA to see if there is a consumer lawyer in your area as we can't help you outside of Alabama.

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As we mentioned in our explanation of why we sue collectors under the Fair Debt Collection Practices Act (FDCPA), Congress found four social maladies were caused by abusive debt collection practices:

1. Breakup of marriages;
2. Loss of jobs;
3. Filing of unnecessary bankruptcies; and
4. Invasions of personal privacy.

15 U.S.C. 1692 says in subsection (a):

There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

Let's look at these briefly.

Breakup of Marriages
Money problems are at the root of many broken marriages. That is not the fault of debt collectors. But what is the fault of debt collectors is when through abusive practices the collection industry puts even more stress and strain on an already fragile marriage.

Debt collectors have been known to say to one spouse "Why doesn't your husband take care of you and pay the bills" or "Can't you get your wife's spending under control?" and similar types of stress producing statements. Threats of sending your spouse to prison certainly adds stress. Threats of immediately garnishing wages (normally not allowed) create additional pressure in a situation where there is enough pressure due to money issues anyway.

The biggest threat to a marriage, however, is not normally what is said to one spouse but instead what is said to those outside the marriage. When your mother in law is contacted about you not paying some bill. When your father is called. Or your brother in law or the neighbors are contacted by abusive collectors. All of these things are designed to create intense pressure so eventually there is a "snapping" by one or both spouses.

Its hard to be upset at the third party who has been contacted illegally so the natural target for the anger is the spouse. The one who incurred the charges. Or the one who didn't pay the bills like he or she was supposed to pay. Or the one who has been sick and unable to work. Or the one who didn't get the promotion and so is not making the money that we wanted our spouse to make. Etc.

The blame gets transferred to the spouse and the desire is to just start over.

Congress found abusive debt collection practices increase this pressure and, obviously, breaking up marriages because some collection agencies can't obey the law is a bad thing and needs to be stopped.

Loss of Jobs
Bill collectors who like to break the law often target our work. They know if they can threaten the way that we make our money, then we will have to pay them -- even if we don't owe the debt.

So, how does an abusive debt collector do this?

Call your work repeatedly and leave you messages. Even when you tell the collector you can't receive these types of calls at work, the collector will often still do it to bring pressure on you.

Call your co-workers. "I can't get in touch with Susie. She won't call me back. Can you please get her to call me -- this is a very important private business matter."

Unless your co-worker is naive, she will know what this is about. Its a debt collector.

And when she brings you the phone message slip or sends you an email, you feel the world start to close in on you. Especially when this is repeated over and over. This is the classic "Office Party" technique of calling your co-workers.

Another strategy is to call your boss or supervisor. Let her know that you are avoiding calls. Let her know that there is something in your personal life that has now spilled over into your work life.

When your supervisor mentions this to you, and you know the company is looking at layoffs, how does that make you feel? The danger is that even though you are a good worker, the company does not have time for people who "can't handle their personal matters outside of work."

Finally, just the stress of being illegally threatened, of having your phone blown up every day, of being harassed and abused, can take your mind off of work and cause your job performance to slip.

All of these are unnecessary problems. These don't result from honorable debt collectors. They do result from those debt collectors who are willing to break the law in their greed to gain a few dollars from you.

Continue reading "Abusive Debt Collection Causes Four Social Maladies" »

The Kentucky Bankruptcy Blog has posted an article that discusses how purchasing a short sale home can impact your taxes. A short sale occurs when a homeowner and their lender agree to sell a house for less than is owed on a mortgage. Both the lender and homeowner must agree to it and doing so can avoid going into foreclosure, which benefits both parties. Short sales were uncommon before to the current mortgage crisis started happening, since the homeowner loses money and is even sometimes sued by the lender for the amount remaining on the mortgage. Homeowners could also have been taxed by the IRS on the amount of money that was "forgiven" by the mortgage lender.

The Mortgage Forgiveness Debt Relief Act was passed in 2007as a response to the mortgage crisis. It excludes debt forgiveness from a short sale from being counted as taxable income. Debt that has been forgiven by a lender due to a foreclosure, short sale, or refinance from 2007 to 2012 is eligible for the tax relief offered by the Mortgage Forgiveness Debt Relief Act. Up to $2 million can be eligible for relief if you're married, or $1 million if filing as a single. However, it only applies to your principle residence and not a second home, a car loan, or credit card debt.

A forgiven debt is generally taxed as income to the tax payer, but that is not always the case. The most common exclusions of this tax are: (1) if the tax payer was insolvent immediately before the debt was forgiven; (2) if the debt was discharged in bankruptcy; or (3) if the debt is a qualified principal residence indebtedness until 2012.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

Last month the federal government took a small step towards trying to reign in some of the mortgage servicing abuse that we see on a daily basis. Here is some of the language from the announcement from the OCC:

The eight servicers are Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo. The two service providers are Lender Processing Services (LPS) and its subsidiaries DocX, LLC, and LPD Default Solutions, Inc.; and MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc. (MERS).

"These comprehensive enforcement actions, coordinated among the federal banking regulators, require major reforms in mortgage servicing operations," said acting Comptroller of the Currency John Walsh. "These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers. Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward."

The enforcement actions require the servicers to promptly correct deficiencies in residential mortgage loan servicing and foreclosure practices that examiners identified in reviews conducted during the fourth quarter of 2010. The actions require the servicers to make significant improvements in practices for residential mortgage loan servicing and foreclosure processing, including communications with borrowers and dual-tracking, which occurs when servicers continue to pursue foreclosure during the loan modification process. The enforcement actions require the servicers to ensure that foreclosures are not pursued once a mortgage has been approved for modification and to establish a single point of contact for borrowers throughout the loan modification and foreclosure processes. In addition, the actions require servicers to establish robust oversight and controls pertaining to their third-party vendors, including outside legal counsel, that provide default management or foreclosure services.

I haven't seen much that has come from this but hopefully there is some positive action being taken by the servicing industry.

I like how Denise Evans put it:

In a nutshell, each of these companies will to have to CLEAN UP ITS ACT!!!!!! . . . Maybe now we’ll see some reasonable responses to short sale and loan modification requests, instead of the auto-pilot conveyor belt straight to foreclosure.

Well said and hopefully this will happen.

When people ask us what we do we respond "We sue abusive debt collectors."

Some people like this. Some people don't. But everyone seems to have an opinion on it.....

Here are some reasons why we sue abusive collectors:

Consumers who owe the debt should pay it but they should not be mistreated by collectors. Just like if you speed, you should take care of that but you would not expect to be beaten or shot just because you are speeding. In the same way, just because you owe a debt does not mean the collector should be unfair, dishonest, treat you with a lack of respect or treat you without dignity.

When collectors abuse consumers, this leads to marriages breaking up, jobs being lost, unnecessary bankruptcy filings to stop the abuse and it also leads to invasions of privacy. These are social ills that are not needed. We can't stop all of these, but we can help to stop the ones that occur because some collection agency thinks it is above the law and can abuse consumers.

We also sue abusive collectors because the honorable collectors, the ones that follow the law, should not have to compete against cheaters that do break the law. In school we don't want to be graded compared to a cheater or have our kids compete with cheaters. In sports we don't tolerate teams that cheat -- they get penalized and they lose the benefits (think of a penalty flag in football and what happens). No-where do we tolerate cheating and by suing abusive debt collectors we help to level the playing field so that the honest, respectful, truthful, and dignified collectors can do their job.

Usually after we explain why we sue abusive debt collectors, folks we talk to (no matter their politics or financial situation) "get it" and applaud it.

Unless we are talking to abusive collectors.

Well, they want the other abusive collectors sued so they will be the only ones that can cheat.

Our solution -- sue as many of them as we can to help encourage them to change....

If you live in Alabama and are experiencing a debt collector trying to collect a debt from you that isn't yours, or if you are being harassed by a debt collector, and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

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Sheila Smoot is a friend of mine and she has a new website that will have lots of information about her new TV show "Your Side With Sheila Smoot".

You will find consumer tips about what to do if you are dealing with tornado issues that are affecting so many in Alabama and other southern states. In the articel Sheila and her team include information on "crooks showing up at your door" as well as "the need for renter's insurance" and "insurance: your steps following a storm".

You can also find information about various individuals who help consumers ("consumer squad") including a consumer lawyer who bears a striking resemblance to me... :)

Keep an eye on her website and her show which is broadcast on CBS 42 on Saturdays at 11 am CST. You can also read about her various accomplishments here.

Those of you who remember her previous journalism career remember the bad guys hated when she showed up to interview them.... I don't think that will change as she is still "on your side".

The New York Times has posted an article that discusses recent lawsuits that accuse Wells Fargo of discriminating against African Americans by steering them into predatory loans. Allegedly, the company deliberately pushed African American homeowners, who qualified for prime mortgages, to subprime loans. The lawsuits claim that the homeowners could have kept up with mortgage payments on a prime loan, but the more expensive subprime loan payments caused them to default on the loan. The case also claims that Wells Fargo should have known that would happen.

One of the lawsuits comes from Memphis, Tennessee and the other from Baltimore, Maryland.

"The City of Memphis and Shelby County have not alleged that Wells Fargo lending practices resulted in a host of social and political ills plaguing entire sections of the community,” Judge Anderson wrote in a 32-page order. “Rather plaintiffs contend that defendants have targeted individual property owners with specific lending practices (reverse redlining), resulting in specific effects (foreclosures and vacancies) at specific properties, which in turn created specific costs (services and tax revenue) for local government.”

Judge Anderson of the Federal District Court for the Western District of Tennessee dismissed the lawsuit, saying that it was too "broadly drawn." Judge Anderson's ruling came about 2 weeks after a similar case was dismissed in Baltimore by Judge Motz.

But this time, Judge Motz said city officials had narrowed the allegations enough to show a plausible link between Well Fargo’s actions and its impact on the city. The issue, he said, was whether “the city has plausibly alleged that the properties in question would not have become vacant but for the allegedly improper loans made by Wells Fargo.”

He said the city provided the link by claiming that Wells Fargo deliberately steered African-American borrowers who qualified for prime mortgages into subprime loans. As a result, the plaintiffs claim, borrowers who could have kept up with payments on a prime loan defaulted because of the more expensive subprime payments.
But this time, Judge Motz said city officials had narrowed the allegations enough to show a plausible link between Well Fargo’s actions and its impact on the city. The issue, he said, was whether “the city has plausibly alleged that the properties in question would not have become vacant but for the allegedly improper loans made by Wells Fargo.”

Ms. Teri Schruttenbrunner, a spokeswoman for Wells Fargo, said:
“We disagree with these rulings, and we will present the facts which we believe will ultimately win these cases. Our team members make loan pricing decisions based on credit and transaction risks, consistently treating our customers fairly.”

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

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Posted In: Mortgage/Foreclosure

The New York Foreclosure Law Blog has posted an article that gives some reasons why some loan modifications are accepted and others are rejected by lenders and pushed into foreclosure.

One reason is that many lenders have poorly trained staff, which also leads to homeowners being told false or inconsistent information. Sometimes lenders even tell homeowners that their packet is missing documents even though they have been sent in multiple times. Some lender reps even encourage homeowners not to pay their loans and later the homeowner is rejected for a loan modification. This is particularly irritating for homeowners as they feel like the lender actually set them up to be rejected for a loan modification.

Some lenders encourage homeowners to apply for modifications but then later inform them that a "mysterious investor" won't approve it. Homeowners seeking a loan modification should plan ahead and check a copy of the pooling service agreement and be willing to try other arrangements.

Most homeowners feel lost and helpless when seeking a loan modification or fighting a foreclosure. They don't know how to make a lender keep their word and act appropriately, however, an attorney does. Consulting with an attorney can be crucial to obtaining a loan modification.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us. We have also started handling bankruptcy cases.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

NorthJersey.com has posted an article that discusses how some heads of non profit agencies specializing in bankruptcy counseling are using the lagging economy to line their personal pockets. There are 44 non profits nationwide who are federally approved to provide bankruptcy counseling. 12 of the 44 pay their executives $300,000 or more annually.

"The money that's coming in is coming off the back of consumers," said John Rao, a lawyer with the National Consumer Law Center in Boston. "It certainly makes you question the concept of them being non-profits."

The non profits who specialize in consumer credit counseling argue that they pay their executives what other non profits of the same size pay their executives and claim the bankruptcy fees they collect from clients are just a small part of their funds. In 2005 Congress passed a law that required consumers to have a 90 minute counseling session with a financial counseling agency before being able to file for bankruptcy. They can charge up to $50 for this required session, but have to waive the fee if the person can't afford to pay. Typically, most of these non profits' income comes from 2 places: fees paid by consumers and grants and fees from banks and other financial institutions.

Because many of the non-profits bring in a significant portion of their revenue from debt-management fees, some consumer lawyers say the agencies have an incentive to steer debtors away from bankruptcy filings and into the debt-management plans. Industry officials, however, insist they steadfastly avoid doing so.

What's indisputable is that some counseling agency officials are among the nation's highest paid non-profit executives. Topping the list in 2009 was Ivan L. Hand, president of Money Management International in Houston, at $918,641, including bonuses, deferred compensation and other fringe benefits. MMI is by far the largest non-profit credit counseling agency, with revenues of $105.9 million.

Also high on the list are Jane E. McNamara, president and CEO of GreenPath in Farmington Hills, Mich., who received $565,352, and Etta W. Money, president and CEO of InCharge Debt Solutions and four related non-profits in Orlando, Fla., whose total compensation came to $476,171.

Some bankruptcy lawyers and consumer advocates argue that such massive paychecks are ridiculous and make it appear that some people are, in fact, making a profit off a non profit organization. Executives and officials at larger non profits argue that their pay is comparable to what executives at organizations of a similar size earn...which is allowed by federal tax laws. Gail Cunningham, vice president for public relations at the National Foundation for Credit Counseling in Washington, says that the salaries are reasonable given the size of the non profits.

The Consumer Law Center- which advocates to Congress- has been arguing that the required 90 minutes sessions are a waste of time and money. They claim that the session remains identical to how it was before the 2005 law passed, and that consumers only do it because they are required to and already know that they will end up filing bankruptcy. The required session is just a cost added to them.

However, Ms. Cunningham counter-argues that no one needs credit and debt counseling more than someone considering bankruptcy. Sometimes the counseling session results in consumers who were going to file for bankruptcy being steered to sign up for a debt-management plan. The non profit agency then works out a payment deal with creditors and charge the consumer a monthly fee.

Sandy Shore, a supervisor of a non profit debt counseling agency, says that her agency doesn't allow bankruptcy counselors to steer their consumers away from filing bankruptcy.

Before you decide to file for bankruptcy, it's imperative that you consult with an attorney. If you have further questions or concerns about bankruptcy, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

The Kentucky Bankruptcy Blog has posted an article that discusses why borrowers should sometime be cautious when taking out loans with credit unions. The author of the blog, Ms. Julie O'Bryan, has an extensive bankruptcy law practice in Louisville and also has an excellent book available for Kentucky residents who are considering bankruptcy.

In the article, Ms. O'Bryan opens by reminding borrowers that credit unions and some banks use "Loanliner" documents, which were developed by CUNA Mutual Group and are standard loan documents that are sold to financial institutions. About 70% of credit unions use Loanliner documents, which require a lending provision in which the borrower agrees that all other loans with the lender would be cross-collaterized.

Cross-collaterization is when the credit union uses the collateral from one loan for other loans, too.

The cross-collateralization clause from a recent Loanliner agreement reads: “the security interest also secures any other loans, including any credit card loan, you have now or receive in the future from us and any other amounts you owe us for any reason now or in the future.” Credit unions are fond of using this clause in vehicle loan agreements to secure all other credit union debts with the vehicle. This often causes surprises (and anger) when an unsuspecting credit union member tries to trade-in his car and discovers that the debt on the vehicle includes a personal loan, a line of credit, and credit card balances.

There are some options you have if you are confronted with cross-collaterization on an auto loan. You could file Chapter 13 bankruptcy and knock the amount you owe on the loan to match the actual value on your vehicle. In a Chapter 13 case you can "cram-down" over 3 to 5 years and any remaining debt is discharged at the end of the case.

You could also file for Chapter 7 bankruptcy. In a Chapter 7 case, the attorney would ask the credit union to re-draft an affirmation agreement for your vehicle without including other debts. You're basically asking the credit union to remove the cross-collaterized loans. If they refuse you can surrender your vehicle to them to remove the debt on it or you can redeem the vehicle. Redeeming the vehicle is only an option in Chapter 7 and allows the debtor to keep the vehicle and only make a lump sum payment based on the vehicle's actual value. Monthly payments are not an option.

Ms. O'Bryan suggests if you have a loan through a credit union you should review the paperwork carefully with a qualified bankruptcy attorney to see if there is a cross-collaterization stipulation.

Before you decide to file for bankruptcy, it's imperative that you consult with an attorney. If you have further questions or concerns about bankruptcy, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below: