2015-05-15 Q&A webinar with financial protection attorney John G. Watts




This is the first one of our weekly question and answer webinars.

Here’s the transcription with some of my sloppy words cleaned up. 🙂

Well, hello and welcome to our first question and answer webinar. We’re going to do these about every Friday or so. The purpose of these webinars will be so that you can ask questions. If you’re on this live, of course, you can ask them. If you are not live on this or you want to submit questions at a time that’s convenient to you, you can always email me: john@wattsherring.com. We have a number of those questions that have been submitted already. Probably, unless we have somebody that has a question right now, we’ll just go through these previous questions.

The idea is you can ask about consumer protection issues. That can be things like credit reports, debt collectors, mortgages, foreclosures, being sued by a debt collector, also, elder law or estate planning issues. What’s a will? What’s a trust? What’s a special needs trust? How do I qualify for Medicaid in Alabama. Things of that nature. We’ll go ahead and get started. I’m not sure exactly how long these will last. Maybe 30 minutes, maybe longer. We’ll just start going through some questions.

First question I have is, somebody had written in, “What’s the process of a short sale?” This is when you’re facing a foreclosure and you’re wanting to avoid that foreclosure. There’s something called a “short sale.” A short sale is where you agree with the bank to sell your house for less than what you owe. Let’s say you owe $200,000, you get an offer for $180,000.

That’s $20,000 short. You either have to come to the closing table with 20 grand or you get your mortgage company to agree to allow this short sale to occur.
The advantage of this is it prevents a foreclosure because you’ve actually sold your house.

The downside is, you have to get your mortgage company to agree to do this and sometimes that’s a little difficult to do. You also have to wonder, are they going to come after me for that deficiency or that shortness, if you will? That 20,000 in my example. If they will do that, then you’ve got to decide, is this worth it?

A lot of times, you can get them to agree to waive that or just not come after you for that. You also need know, how will this be reflected on your credit report? A number of issues to look at but a short sale can be a very valuable alternative to foreclosure.

This is what, broadly speaking, is called, “loss-mitigation.” That can be a loan modification, a deed in lieu of foreclosure, or a short sale. There’s other things but for our purposes, just talking about a short sale right now.

Typically, the process will be that you have to try to sell your house with a licensed realtor and then when that’s not successful, then they’ll let you lower the price so that it’ll be a short sale. Then, once you get an offer, then you’ve got to get the servicer to approve it and oftentimes, the investor. That could be Freddie Mac, Fannie Mae, it could be some trust that’s out there. You’ve got to get those guys to approve it and then, ultimately, there’s paperwork. A lot involved in it, but if you are facing a foreclosure and you’re trying to avoid it, then a short sale’s certainly an option to look into.

Next question we have is: “Can a debt collector be accountable for causing your credit score to drop by reporting inaccurate information?” The answer to that is absolutely.

There’s really two laws at play. One is the Fair Debt Collection Practices Act and the other is Fair Credit Reporting Act. If a debt collector is reporting false information and they know it or they should know it, that’s going to violate the FDCPA (Fair Debt Collection Practices Act).

This is assuming the debt collector is subject to that law. It’s a consumer debt, so not a business type debt. You’re dealing with an actual debt collector, so not the original creditor. Then they violate the law, which if they’re reporting false information and they know it or they should know it, then that’s going to be a violation of the law.

Then, there’s also this thing called the Fair Credit Reporting Act (FCRA). You get your credit report, you look at it. You say, “Wait a minute, I don’t owe this debt collector $5,000. I settled with them two years ago for $3,000. I own them zero, but they’re reporting I owe two or maybe they’re reporting I owe the whole $5,000.”
That’s going to be false credit reporting. It violates the Fair Debt Collection Practices Act, but under the Fair Credit Reporting Act, you can dispute that through the credit bureaus. You give them the proper proof and they have an obligation to investigate. That includes going to the debt collector, if they need to.

You may send them enough information that the credit bureau says, “We’re fine. We don’t have to talk to the debt collector.” If they do talk to the debt collector and the debt collector says, “Oh no, keep that on their credit report,” then that’s a violation of the Fair Credit Reporting Act. If you’ve given enough information to the credit bureau and they keep it, then that will violate the FCRA on behalf of the credit bureau as well. Those are places like Equifax, Experian, and TransUnion. If there is a violation of the law, typically the best approach is to sue in federal court and you get money damages if you’re successful. That tends to prompt these guys quickly to fix your credit when they realize that you’ve sued them in federal court.

Our next question is, “Will an inheritance to my disabled daughter on SSI and Medicaid jeopardize her benefits?” What this is talking about is, let’s say your daughter has a disability and she’s drawing SSI, not Social Security Disability Income but the Supplemental Security Income. That is what is called a means-based or means-tested benefit. You have to meet certain requirements on income and assets to qualify. Same thing with Medicaid.

What do you do though if you’re daughter is set to receive an inheritance? Maybe a grandparent, an aunt, and uncle, somebody is leaving money to your daughter who’s on SSI and on Medicaid, is that going to jeopardize her benefits?

The answer is, probably it will. Normally, on those benefits, your daughter can only have $2,000 in assets. Unless it’s a very small inheritance, that’s going to push her over that $2,000 limit. That’s going to be a problem as far as staying qualified for SSI, staying qualified for Medicaid. That might be incredibly important to keep those benefits. So, what do we do?

Typically, what we do is we set up what’s called, “The Special Needs Trust.” Imagine a box and we put that inheritance into the box. That way, it’s not considered your daughter’s money. It’s owned by that Special Needs Trust or that box. There are very specific rules for how we reach into that box and pull out money to benefit your daughter. Normally, we cannot replace benefits that are already provided by SSI or Medicaid, but we can do things to supplement. For example, maybe eyeglasses are not covered or maybe certain dental work is not covered by these government benefits. We may be able to then, reach into that box, pull out money to take care of that. Again, very specific rules on this but just to answer this, hopefully quickly here, yes, an inheritance or other money going to your daughter who’s on SSI, Medicaid can very well jeopardize those benefits. You want to sit down with a lawyer. Find out, does it make sense to do a Special Needs Trust? If it does, how do we do that process?

Our next question is related to this. “Will an inheritance to someone on SSDI, that’s the Social Security Disability Income, and Medicare, so not Medicaid, but Medicare, will that jeopardize their benefits?” The answer to that is typically no.

If we have someone that’s receiving Social Security Disability Income. They’ve worked, they’ve now become disabled and they’re getting this money in from Social Security, then that is not means-based or means-tested. It’s just a matter of, did you have enough work quarters or credits or whatever Social Security calls it? Do you meet the definition of disability? Okay, you get this money.
Whether you get an inheritance or not, doesn’t have anything to do with that.

This question is on Medicare, which again, is typically not means-tested. You qualify for Medicare based on your age or certain health issues and doesn’t really have anything to do with the amount of money that you make or the amount of assets that you have.

Another question we have is, “What is the change that the VA is trying to make on the VA pension or what is know as Aid & Attendance?”

This is a benefit that, for a married veteran, what’s called a war-time veteran, can mean up to $25,000 a year tax free. You use that money to pay for long-term care. That can be care at home, in an assisted living facility, or even in a nursing home. Right now, there is no what’s called, “Look-Back Period,” where if we apply right now, does the VA look back in time and say, “Did you give away any assets?” Right now, there is no such period, but the VA is trying to create that look-back period.

Earlier this year, they said, “This is what we’re doing. We’re changing the rules.” Whether they can do that or not is for a different video. They gave an open period until March to comment on that. In our experience, even though it’s now May, we’re not seeing them apply these rules. I think that’s because there are so many problems with these rules where, I think the VA maybe didn’t think it through clearly what they were saying.

I’ll give you just one example. They say, “If you give anything to a trust, then we’re going to penalize you.” We apply now, we look back in time and their proposal is three years. If we gave anything away, they’re going to penalize us or punish us going forward. They say, “If you give anything away to a trust, we’ll penalize you.”

Very simple example. Say a veteran, married veteran, they meet the military requirements, the disability requirements, the financial requirements, income and assets, they have $40,000 in assets. Two and a half years ago, they set up for estate planning purposes, a Revocable Living Trust. That’s a trust, a box, we put stuff in. It’s still considered ours for all intents and purposes. A veteran does that, they’re in perfect health, and now they’ve had a stroke and they need this VA pension. The VA would say, “Aha, you gave away assets. That’s a problem. We’re going to penalize you.” Well, that still would be considered our assets and maybe it’s a house we put in plus $40,000. Normally, the house doesn’t count as an asset but now, since we transferred into this Revocable Living Trust which really does nothing in terms of ownership, the VA’s going to say, “Now we’re going to penalize you.”

That just wasn’t well-thought out. That’s not what the VA means, but that’s what they wrote. But the VA is trying to change the rules. Anyway, here’s the bottom line. If you think you might qualify for this benefit, you need to get with a lawyer right away because you may need to take action now before the new Look-Back Period and other changes to the law come into play.

On any of these, if we can help you, if you live in Alabama or this is about a family member in Alabama, you can always reach us at 205-879-2447 or you can go to www.AlabamaConsumer.com. That’s our website for consumer issues. Or www.AlabamaElderLawyer.com and that’s estate planning or elder law issues.

I think we’ve got time for maybe one more question. This has to do with being sued by a debt collector. Our courts, particularly what’s called Small Claims & District Court, they are just dominated by these lawsuits. Some of these debt buyers, debt collectors file a hundred lawsuits in Alabama a week. Just one debt collector files a hundred a week. Another debt collector files a hundred a week.

The question is, “What should I do when a debt collector sues me and they leave the summons, that’s the legal document that says, ‘All right, you’ve been sued and here’s your time period to respond, Small Claims Court, 14 days, District Court, 14 days, Circuit Court, 30 days.’ The question is, if I’ve been sued and I get the summons, but they leave it on my door or they just throw it on my porch, throw it in my yard, am I considered served?”

I’ll tell you this, I think from a technical, legal standpoint, if they simply leave it on your porch, then I don’t think that’s being served. What the rules talk about is leaving it with a person who lives in your house, an adult who lives in your house. That could be a spouse, a child, a roommate, as long as they live in your house. The rules don’t talk about throwing it in the bushes or taping it to your door.

I’ll give you the practical side. If you know you’ve been sued, then there’s really no benefit in my opinion to just waiting around saying, “Well, you technically didn’t serve me. I’m just going to wait until you serve me.” My approach is to say, “When these debt collectors sue us, instead of backing up and we’re scared and we’re going to wait — No, let’s go forward instead. Let’s charge these guys. Let’s get in there, let’s respond to the lawsuit. Let’s get a trial date and let’s win the case because the sooner we win the case, the sooner we have options against these debt collectors. ”

Right now, as I’m recording this, it’s May 15 and we have, I think ten Federal Court lawsuits against Midland Funding (a prominent debt buyer) that are pending, active cases right now. I’ve got another one we’re filing. We’ve got, I think two Federal Court lawsuits against Asset Acceptance and then we have some other cases out there. These all arise out of when consumers were sued by Midland, sued by Asset Acceptance, Portfolio, whoever it may be and the consumer won that case. We want to get to that trial to win that case.

You do have five options when you’re sued by a debt collector:
**fight the lawsuit on your own,
**settle the lawsuit on your own,
**hire a lawyer to fight the lawsuit,
**hire a lawyer to settle the lawsuit.

We have an entire video webinar on these 5 options when sued. I think it’s like an hour and twenty minutes long. We go over these options. Then we answer a bunch of questions that come up over and over and over, so we went ahead and put those in there.

Just in terms of service of process, if it’s just stuck on your door, thrown in the bushes, thrown in the front yard, the front porch and we see that all the time, that’s normally not considered good service. I would just be very careful about saying, “What, hey, you didn’t serve me. I’m not going to even pay attention to this,” because the court might mistakenly believe that you’ve been served and then those days start counting. When you run out of days, 14 for Small Claims or District Court, 30 for Circuit Court, then the debt collector says, “Hey Judge, we served him. He didn’t answer. Give us a default judgment.” That’s signed and now you have a judgment against you.

If you weren’t properly served, you can undo that and we have had situations where clients have hire us and they find out they had a judgment from 14, 15 years ago and we’ve been able to get those set aside because if you’re not properly served, the lawsuit’s no good against you. You can do that, but there’s expense in it, there’s time and the judge may say, “No.” My thought is, if you know you’ve been sued, then go ahead and figure out your options.

We’ll make this the last question for today.

Again, if you would like to get in touch with us, my name is John Watts. You can call my office, 205-879-2447. Or you can go to AlabamaConsumer.com or AlabamaElderLawyer.com.

If you call the office, typically you want to ask for Carolyn and tell her what’s happening and what your situation is. Then, she’ll either get back with me and see what we can do or if it’s certain types of cases, and she knows, she’s been working with us a long time, when to go ahead and set up an appointment. It can be in person, it can be by phone, it can be by video, whatever is most convenient. We’ll be happy to help you anyway we can.

I appreciate you watching this and if you have questions, we’ll do this again next Friday and we’ll get the exact time that we’re going to do this and send that out to you. If you’re interested, just contact us through one of our websites or you can email me john@wattsherring.com. Thanks a lot. Have a great day. Bye-bye.


John G. Watts

Watts & Herring, LLC Birmingham and Madison Alabama offices (we represent folks all over Alabama)


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