Peter Francis Geraci A Bankruptcy Blog - Chapter 7 & 13

Like many Americans, a man simply owed money. One morning, the man left his family to try and settle the debts. That evening, his family was widowed and fatherless.

This man’s name was Irzen Octa and lived in Indonesia. He like many people was in debt and was worried about losing his home. His debt included an $11,000 bill to Citibank – almost double the original charge amount because of high interest.  He had bill collectors calling and other sleeping on his front step after Octa was unable to pay.

His wife is now suing Citibank for $350 million in damages. There is video of Octa entering a room in Citibank offices and leaving two hours later in a wheelchair.  Citibank in Indonesia contracted with outside debt collectors. Currently, they are examining who the collectors were and the job they were hired for.

The men Octa interviewed with were arrested (none were Citibank employees) for alleged group violence and mistreatment resulting in death.

How far is too far? Debt collectors in America have been criticized for violating FTC regulations but nothing resulting in death. America thankfully has bankruptcy law to protect you when the collectors are getting too harsh. You have a safety net to either eliminate your obligation to pay or pay your debt interest free with a Chapter 13 bankruptcy.

If you are struggling and have debt collectors threatening to sleep on your porch, call us! Bankruptcy will help you. To read the article in The Washington Post, please click here.

I spoke to a woman today who hated credit card companies almost more than I do. She made payments on time every month for the last 30 years. Every month her letters were addressed as a valued customer and she took pride in the title.

Because of some bad luck, she lost her job and now is on unemployment.  She called the credit card company to ask for help. The lovely woman on the phone closed her account, reduced her credit line and demanded payment.

Thirty years of timely payments and when she called the only helped offered is an inevitable hit to her credit report. If the amount of debt she had on the card was close to the limit, she will now be charged high penalties because of the lower credit limit.

When you have debt, listening to financial advisors like Suze Orman does not get you out of debt. Talking to your creditors is not easy when you owe thousands and have reduced income. The Geraci Chapter 7 solution will eliminate all of her debt so she can start rebuilding.

Understanding that your creditors do not care about you is the first step to rebuilding. Your creditors want payment and if you are unable to do so, the valued customer title will change drastically.

An average American solider has more debt than the average civilian.  In honor of Memorial Day, I want to discuss (belatedly) the Service Members Civil Relief Act.  The law was put into place for soldiers to focus on defending the country and be free of financial distractions.  This law is made (especially for) military men and women who are indebted because of their service.  We want to protect our military from financial hardship and stress and using SCRA can help.  SCRA primarily will:

-Prevent filing of a default judgment

-Stop evictions (as long as rent is not more than $1200 per month)

-Reduce interest on debt (protected against credit with interest over 6%)

However, this is not a permanent solution for debt. Collections, judgments, and interest can resume after 90 days of a soldier’s discharge. So a soldier comes back from serving his/her country and after reclamation, the collection calls and lawsuits will resume.  We suspend the stress caused by debt – but after discharge, a soldier loses his/her SCRA protection.

The only debt protected by SCRA is debt incurred before active duty. To use SCRA for the benefits, a soldier must show service have a “material effect” on the cause of the judgment. SCRA also does not happen automatically. A soldier should send a copy of the mobilization orders to the creditors before being deployed. While SCRA helps soldiers, it can be considered a Band-Aid for a possible debt wound.

The long term solution is a bankruptcy. After the 90-day grace period, a veteran can find themselves with creditor calls and possible lawsuits. The way to stop the lawsuits and judgments is a filed bankruptcy. Eliminating all debt with a Chapter 7 or consolidating in a Chapter 13 repayment plan is the way to permanently relieve the stress of our veterans.  While in active duty, interest on debt (again incurred before duty) is reduced, but after the 90 days, interest will start again.

Bankruptcy is the best way to be debt free.  It doesn’t matter if you are a civilian or a soldier, bankruptcy law is there to protect you for the long run – not until you are discharged from active duty.

The worst part of the bankruptcy process is making the initial phone call. It’s inevitable –no one wants to file a bankruptcy and I do not think many people know enough about the benefits of bankruptcy to consider it an option. Bills are easy to ignore. No one wants to go to the mailbox to find collection letters and notices and if you have multiple creditors, the amount of bills can quickly become overwhelming and the idea of bankruptcy can become frightening.

Once you start opening the mail and bring out the calculator to add up your total debt, most people will try to call creditors to work out a payment plan.  The problem is, some creditors will refuse to work with you, most creditors will propose an unfeasible payment plan, and others will close your account, lower your credit limit and demand the balance in full. If you have ever tried to call your creditors, you understand talking to multiple “representatives” and feeling like nothing has been resolved. That is not very reassuring to someone calling for help.

After a failed attempt at working with creditors, many people try alternatives to get a handle on the debt.  Debtors seek out debt consolidation, credit counseling, or borrowing from retirement. Each option takes time.  Debt consolidation has no set time limit – you could very well be in a repayment plan for 10 years while paying interest, a payment to the debt consolidator and your monthly bills. A Chapter 7 bankruptcy on the other hand could be done (and you could be debt free) in as little as 3-4 months.

The majority of people who go through the agony of debt consolidation eventually seek bankruptcy relief. If you have more debt than income, if you can’t sleep at night because of worries about debt and if you are afraid to answer your phone – consider bankruptcy. It’s a sigh of relief when you hear the words, “we can help.”

Recognizing you are in debt is the easy part.  I have spoken with many people who laugh about the severe amount of unsecured debt they accumulated. I’m missing to see the joke.  When you have a substantial amount of debt, it’s really not a laughing matter. Yes, creditor threats can be so ridiculous that it can seem comical. But, if collectors are calling you to the point of being afraid to actually answer your home phone – it’s time to put the comedy aside and do something about it.

With our current economy, a lot of Band-Aids for debt wounds are available. You can pay $10 per month minimum payment and sure the collection calls will stop but the debt wound still exists.  I have rescheduled more appointments for potential bankruptcy filers based on nothing more than “I don’t know if I want to file.” For most people contemplating bankruptcy, there is no reason not to file. With more debt than income, what are you supposed to do? Why spend the rest of your life, making minimum payments?  You are not moving forward – you are barely moving side-to side. I’m addressing the people with more than $10,000 in debt and are fully employed.           

For a working person, a Chapter 13 bankruptcy is a great solution.  You pay back what you can afford to pay back without the interest.  It answers the “moral” question of I spent it so I should pay it (is it moral for some creditors to slash your credit limit, increase your minimum payment, and charge you close to 30% in interest?).  Not to mention, a Chapter 13 repayment has no interest!  For people who are working and have credit card debt – the interest is what makes many people fall behind and get to the point of needing a bankruptcy. 

In a Chapter 13 you are able to protect all of your assets.  It’s a repayment plan so there’s no reason to lose your comic book collection or your Porsche 944. Depending on your individual debt, income, and assets you could be paying as low as 10 percent of what you owe.  A filed Chapter 13 bankruptcy allows you to keep your Chapter 7 option available – just in case. Life happens and having the safety net of Chapter 7 debt liquidation is comforting.

Realistically, if you have more debt than income in a month and you want to want to get a handle on things – bankruptcy is your best option.  It is the sane way of getting control of your situation.  I have heard more make-shift solutions for paying off debt and ultimately whether it’s today, tomorrow or five years from now, these people file a bankruptcy.  Debt is not a laughing matter; it can be a bar to your financial future.  Instead of doing the debt negotiating, money borrowing, ignoring dance of the debtor – file a bankruptcy and in a couple of months you can actually feel some relief.

What will a bankruptcy do to my credit? The most redundant question asked by potential bankruptcy filers. The simplest, straight-forward answer is you don’t have good credit now! 

When it comes down to it – there are two major reasons you call a bankruptcy attorney. Number one, you received a lawsuit summons or collectors are calling like crazy.  This means you have not made a payment in some time; your creditor tried contacting you directly and failed so sold the account to a collection agency.  The collection agency tried contacting you directly and failed and hired an attorney to sue you for the balance to try to recoup some of the cost from purchasing the account.  The biggest contributor to your credit score is timely payments – not only did you not make timely payments to your original creditor but the collection agency adds so many late fees there is no way for you to get caught up.

Solution – you file a bankruptcy. You eliminate the poor credit history and at least you have an opportunity to rebuild. In phonebook ads, organizations offer credit cleanup for a substantial fee. Realistically, there is nothing they can do.  The only way to eliminate something from your credit report is to dispute it (and win the dispute) and if you ignored the collection calls, you really don’t have a leg to stand on.  Post-bankruptcy you stay current with your car note, mortgage payment, student loan payment, etc. you can reestablish your credit with timely payments.

Second major reason – you have made payments on time but your credit cards are maxed out and you just found out about a loss of income.  Whether your hours and overtime are going to be cut or if your monthly expenses increased and your fixed income cannot cover the costs and minimum payments, you call a bankruptcy attorney because in the foreseeable future you will not be able to stay current. 

Again, you do not have good credit. In actuality, you have too much credit.  Another major factor when applying for financing is your debt to income ratio.  If you have $60,000 in credit card debt and are making $35,000 per year, you will never pay off the debt.  Even if you do, you will be paying significantly more in interest than anything else. A financer will see the current payments but will also consider you have a tremendous amount of debt and a significant portion of your paycheck is going to minimum payments (well realistically to interest).

Solution – you file a bankruptcy.  Post-bankruptcy, you have no debt! All you have is income! Again, you make your payments on time and put money into a savings account and you will be fine.  Bankruptcy is one of the country’s oldest laws and people have been able to “reestablish credit” for centuries.  

Bankruptcy is like Game 7 of the Stanley Cup Playoffs.  You can win and move on with a fresh start to erase the losses or you can go home still in debt – ashamed of the fact you can’t get a puck past Roberto Luongo.

On Check N' Go's Web site there is an advertisement of a young hound puppy with the phrase, "Life can be unpredictable. For those times we're here. Quick approval time. Less than perfect credit. Pay back on your next pay period" The ad also includes a quaint sign stating "Veterinary Hospital."  Way to play on emotions, Check N' Go.

Payday loans can be considered a necessary evil – when you need money for food, rent, Fido’s check up, etc. and have no where else to turn a payday loan seems like a good option. When you're desperate, it is easy to skim the lines of the contract and mindlessly hand over a check. But, the payday loans will make you pay, and then pay, and then pay some more.

The consequences seem to heavily outweigh the actions of taking a payday loan. For example, you are short on rent and need some extra cash for your landlord.  You take out a payday loan for $500 and with an APR of 842.31% in as little as 13 days the bill will go to $650.00 if all payments are made on time. If you need to extend the loan, it is an additional charge for the extension. If you miss a payment, the lender can take the money from your bank account or proceed with a wage assignment and deduct the funds directly from your paycheck. It’s a vicious cycle – often to stay current with payday loan payments, you take out another payday loan, and another and another….

Filing a bankruptcy will stop payday loan harassment. A chapter 13 bankruptcy will stop the crazy 1000% interest on some payday loans and a chapter 7 will just eliminate the debt.  Geraci attorneys can send over notice to your payday loan lenders to stop the deductions from your account before your case is even filed.  If you have zero debt then you should be able to afford a vet visit without the payday loans.

 To see full ad, please click here.

It’s 8:01 a.m. You’re trying to get the kids out the door and get a semblance of yourself for the meeting you have at work. Then the phone rings – it’s a creditor. The FTC guidelines state creditors are not allowed to call you before 8:00 in the morning or after 9:00 at night. So of course your creditor waits the extra minute to adhere to guidelines. Creditors do have rights to collect on debt but some take collection to the extreme. It is important to know your rights as a consumer. Number one being – file a bankruptcy and the calls must stop.

While you work on deciding if you want to struggle with debt or feel the relief of being debt-free, below are a list of things your debt collections cannot do from the Federal Trade Commission.

Harassment

Your collectors cannot threaten you with violence or harm. Despite what some of your creditors tell you they cannot publish a list with your name because you refuse to pay your debt. However, your creditors can send the information to the credit bureaus. The harassment of constant phone calls will stop with a filed bankruptcy. A meeting with an attorney will not stop the calls – you need a petition filed with your local bankruptcy court.

False Statements

Your creditors cannot pretend they are:

- Attorneys or government officials

- Police stating you committed a crime

- Representative from a credit reporting agency

Your creditors cannot say:

- You will be arrested for not paying your debt

- They will seize, garnish, and repossess your personal property or income unless they have a court order.

Your creditors may not:

- Give incorrect credit information about you to anyone including a credit reporting agency.

- Send you anything that looks like an official court document if it isn’t.

- Use a false company name.

Unfair Practices

Your debt collectors cannot do the following to receive payment on the debt:

- Try to collect any interest or penalty unless the contract (that you signed originally) allows

- Deposit a post-dated check early

- Take or threaten to take personal property unless court-ordered

- Contact you by postcard

To read about additional debt collection rules, please visit the FTC’s Web site here.

“I love romantic walks on the beach, bubble baths, and losing sleep over my $10,000 in credit card debt!” …not a likely response you’ll hear on The Dating Game, is it? According to a 2009 survey issued by Credit Card Statistics, people are more likely to discuss classically taboo topics like their weight and political views before they admit to how much they owe. Those recognized off-limits topics hold the same possible consequence as debt: rejection. So, why is it that Bachelor #1 would rather dish the saga of his man gut or his political crush before ever admitting that he – like most Americans – gets the occasional call from a bill collector?

For one, debt is hardly something to brag about. Even saying that you’re paying down a debt sets off the red flag that you owe at least one creditor money; do you think your date wants to stick around to find out how many more you owe? The fact alone that people are keeping this dirty little secret hidden under the rug indicates they’re not only ashamed of it, but they’re scared of it. And yes – debt is scary. It means constant harassment from creditors, lawsuits, garnishments, foreclosures…the future is long and grim when you’re buried with debt. Unlike weight and political association, which fluctuate by the day, debt either goes down at a snail’s pace or grows quietly and ominously like a tumor. “So, can I call you later?” No, thank you.

Fortunately, there is a way to clear one’s debt faster than it took President Bush to leave office, and definitely more efficiently than a liquid-only diet. For those who qualify for a Chapter 7 bankruptcy, they can go from debt-stressing to debt-free in as little as four months. With a Chapter 13 bankruptcy, people start seeing their debt drop consistently every month – beat that, Biggest Loser! Before you know it, your debt will be the last of your problems and then the only numbers you’ll be paying attention to will be the ones on your phone, and not on your credit report.

One in four people do it…Facebook stalking, that is. Over 500 million people actively use Facebook today. They’re checking out photos of family vacations, commenting about their friend’s beautiful new Corvette, even doing a little updating of their own. Since 2004, the world’s population has been at your fingertips…and at your debt collectors’, too.

Facebook is a debt collector’s dream: not only is it free, it can potentially give them unlimited access to personal information like your job, family contacts, hobbies, recent purchases, vacations…are you scared yet? These days, your debt collectors don’t have to be secret agents to uncover evidence against you and legally force you to pay your debts.

What you can do to protect yourself? First of all, know your privacy settings and adjust them to the highest levels. Second, be careful whose “friendship” you accept. You may see a good-looking person with a conventional name from your old school and assume you once knew them. Don’t be fooled! That may very well be Joe Creditor, the scum-sucking collector terrorizing your home phone and family members. Lastly, it’d be smart to go through all of your photos, status updates, and personal information so as not to reveal anything you wouldn’t want your debt collectors to know…

Start considering your debt collectors as dangerous and ruthless as identity thieves – they’ll go anywhere and do anything to get your money. Debt collectors are not your friends – especially not on Facebook.