September 19 2017 Who We Are Who We Are Row 1 Dan Lindsey Director Jim Brady Michelle Weinberg Supervisory Attorneys Row 2 Kari Beyer Katie Liss Ainat Margalit Barb Richardson Senior Attorneys ID: 669899
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Slide1
Consumer Practice Group Training
September 19, 2017Slide2
Who We AreSlide3
Who We Are
Row 1: Dan
Lindsey (Director); Jim Brady, Michelle Weinberg (Supervisory Attorneys)
Row 2: Kari
Beyer, Katie Liss, Ainat Margalit, Barb Richardson (Senior Attorneys)Row 3: Shelmun
Dashan, Susana Heredia, Joan Simpson (Staff Attorneys); Rachel Zemke (EJW Fellow); Erica Adams (Paralegal); Meredith Kilburn (VISTA)Slide4
What We Do
Bankruptcy
Foreclosure defense and other homeownership cases (quiet title, mechanic’s lien, home improvement)
Debt collection defense
Consumer fraud
Insurance claimsUtility casesAll of the above (plus credit repair) for survivors of domestic violenceSlide5
Quick Bankruptcy Overview
Chapter 7 = liquidation
Very limited income and assets
Little or nothing left over at end of month
Can discharge unsecured debts like credit cards, utility bills, medical debts
Can only get c. 7 discharge once every 8 yearsSlide6
Quick Bankruptcy Overview
Chapter 13 = repayment plan
Must have decent income - enough to fund plan payment (income > expenses)
Plan payment pays necessary debts over period of 36 – 60 months
Must pay back all secured arrearages (e.g., mortgage, car loan)
Must also pay back all of certain other debts (e.g., child support, recent taxes)Small fraction (usually irrelevant) of unsecured debts
May not work if client has a large asset (because of “liquidation analysis”)Slide7
HPG
When can we file a bankruptcy to save a client from being evicted from their subsidized unit?Slide8
Chapter 13 to Save Subsidized Tenancy
Chapter 13 offers
the ability to reorganize debts/finances, trading future income for
the right
to keep property
. Here, property is the subsidized tenancy.Debtor proposes a plan to repay
rent arrears to lessor. Generally, lessor must be paid 100% of rent owed.Case should be filed before notice of termination expires.Slide9
Chapter 13 to Save Subsidized Tenancy
Problems
“Promptness” refers to how quickly a default in the debtor’s lease obligations is cured,
i.e
, how quickly the lessor is paid the rent it is owed.
Generally, a debtor can propose a plan lasting up to 60 months. But to repay rent, debtor may have propose a much shorter period, like 18 months.Slide10
PBPG
When can we file a bankruptcy to help protect a clients Social Security income benefits?Slide11
Preserve Social Security Benefits
Property here is the client’s ongoing benefits.
Determining factor is whether the client committed fraud.
If not, and if there is no defense to SSA’s determination, then the debt would be dischargeable and the debtor only has to make “best efforts.”
As per our recent win in In re Manzo, lump sum award of past due SSB is exemptSlide12
Preserve Social Security Benefits- Fraud
When a debtor has committed fraud, SSA takes the position that it can withhold 100% of the debtor’s benefits despite the bankruptcy.
We are fighting SSA on this issue but have not won yet.Slide13
IWR
When can we file a bankruptcy to protect a client’s access to a car, or to reinstate a license, so that they can drive to work?Slide14
Stop repossession of client’s car
Here
, property is the
client’s car.
Debtor proposes
plan to repay arrears to finance company.
In most cases, finance company must be paid 100% of arrears. EXCEPT if car was purchased more than 910 days before case filed - then debtor can “cram down” car: only has to pay current market value, not full contract.
Even debtor cannot cram down car, can change interest rate to 5% and save a lot.
Case should be filed before the finance company sells the car.Slide15
Retain car or driver’s license because of parking tickets
Again, the property
is the client’s
car.
Unlike finance contract arrears, parking tickets do not have to be paid 100%. Debtor simply must make “best efforts” to pay in a c. 13. “Best efforts” means making a reasonable monthly payment for at least 36 months.
So, same method as when finance company takes car EXCEPT debtor will need to offer City a “replacement lien” for amount owed in parking tickets up to the market value of the car.Slide16
CFPG
When can we
save the home of a client who is going through divorce?Slide17
Divorce – Possible Options to Avoid Foreclosure
Modification
Hardest Hit Funds: state/federal program that will pay up to $35,000 in mortgage arrears and/or future payments provided homeowner can demonstrate ability to “get back on their feet.”
Chapter 13
NOTE: All of these options require income (including any obtained via divorce) to sustain monthly mortgage payments.Slide18
Debt Collection
When should a client consider filing bankruptcy to stop the madness?Slide19
Not
W
hen
Client is “J
udgment-proof”(or “Collection-proof”)
Social Security Benefits, Veteran Benefits, Unemployment Compensations and most pensions
are exempt from collectionLow net income is exempt from
garnishment (45 x the minimum wage, or about $1600/mo)Illinois
personal exemptions – NOT AUTOMATIC$4000
wildcard$2400 car
$15,000 homesteadNo real estate or hopelessly underwater with mortgageSlide20
Wage Assignments v. Garnishments
Wage Assignment is voluntary and revocable with just a letter
Wage Garnishment is not – 15% of take-home pay
Citations to Discover Assets – distinguish between personal citations and third party citations (bank freeze)
BK can stop a wage garnishment or attachment of assetsSlide21
Pre-Judgment: Defending Lawsuits
Especially important if client has home equity or
garnishable
income to protect, or cannot file BK.
“Real” defenses, for example:
Fraud, forgery, unauthorized useDischarged in BK or paid off
Not the account holder or obligorStatute of Limitations (5 years for credit cards, 10 years for written contracts)
Debt Buyer DefensesIf lawsuit is filed by a debt buyer, client should challenge evidence in court!Slide22
Personal Citation to Discover Assets
Imperative that client go to court on a personal citation
Risk of Body Attachment
Must show all assets, paystubs, tax returns, bank accounts, property
Examination under oath in the courthouse hallway
Citation Dismissed if debtor has nothingSlide23
Third-party Citation and Bank Freeze
Creditor does not have to believe debtor who says they have nothing
Citation is sent to the bank before notice to the debtor
If client’s assets are frozen, this is a priority case and possible emergency
If client’s sole income is Social Security with nothing else in account, and less than 3 months $$ in account, it should not be frozen.
Joint and Co-mingled accounts – sometimes client is not the debtorSlide24
Fair Debt Collection Practices Act
When
will be consider filing an affirmative FDCPA
claim?Slide25
FDCPA Basics
Only applies to third party
collectors
Personal, Family or Household debts (not business debts, torts, taxes & fines, child support
)
Prohibits abusive, unfair and deceptive acts to collect debtsProhibits communications about debt to third
partiesProhibits contact with debtors represented by counsel
Prohibits contact at place of employment (upon request)Slide26
FDCPA Basics – cont’d
Debtor may request in writing to cease all communications.
Requires notice that communication is from debt collector
and all info will be used to collect debt
.Requires notice of thirty days to dispute the debt in writing and debt must be verified if disputed
.Cause of action for actual and statutory damages ($1,000 per case), plus attorney fees. Slide27
Student Loans
Over 1.3 trillion dollars – largest type of unsecured debt, and second only to mortgage debt
Big difference if federal or privateSlide28
Student loans – federal - restructuring
Consolidation
Once to get out of default (behind 270 days), otherwise unlimited
Income-based repayment plans
10% - 20% of discretionary income – can be as low as $0
9 out of 10 payments rehabilitates the loan accountOutstanding balance can be forgiven after 20 years
Deferment/forbearanceTemporary, case-by-case, must show economic hardship or inability to find employmentSlide29
Student loans – federal – administrative discharge
Total and Permanent Disability Discharge via DOE
Veterans
with service-connected condition
On SSDI or SSI
Doctor sends in form saying you have a medically determinable physical or mental impairment and are “totally and permanently disabled” and will likely continue to be disabled for the next 5 years.There is a 3-year monitoring
periodClosed School DischargeFraudulent Misrepresentations (e.g., Corinthian/Everest)Slide30
Student loans – federal – bankruptcy discharge
Bankruptcy – very difficult (the dreaded Brunner test)
Cannot maintain minimal standard of living
Likely to persist indefinitely
Despite Good faith efforts to repaySlide31
Student loans – private
Governed by contract
Typically in default after 120 days
Most private lenders offer disability discharge but no IBR
Debt often sold on secondary market to, e.g., National Collegiate Student Loan Trust, whose debt collection suits can be defended by challenging proof in re
Assignment of loanAmount of debt Slide32
CPG Point Person
Point person = Jim Brady,
jbrady@lafchicago.org
, ext. 8361
Back-up point person = Dan Lindsey, dlindsey@lafchicago.org
, ext. 8365But feel free to ask any of us if you have a consumer law question (see faces and names supra @
Slides 2 and 3)!