Creditors, Let’s Talk about Bankruptcy!

     Bankruptcy! This is not a topic that most creditors wish to discuss! However, with Judges still “reacting” to the economic downturn of the last few years, with bankruptcy filings on the rise, with the conversion of many Chapter 13 cases to Chapter 7, with the aggressive lawsuits filed by counsel for debtors for violations of consumer laws, with increasingly detrimental provisions in Chapter 13 plans, and, with the strict review of proofs of claim and the requirements for the same, we should talk! 

     In regard to proofs of claim, our local bankruptcy courts require that if you are alleging a security interest in the debtor’s principal residence, in addition to the proof of claim form, you must also file a completed form B 10 (Attachment A) setting out the principal due, interest due, late fees, returned check fees, attorney’s fees, escrow shortage, amount due to bring loan current, etc. In addition, each time the debtor becomes delinquent on their mortgage during the bankruptcy, you must file form B 10 (Supplement 2), setting out late charges and other expenses charged to the debt. In the event the debtor’s mortgage payment amount changes due to increase or decrease in interest rate, insurance premiums or real estate taxes, form B Supplement (1) will need to be filed.

     Obviously, this is a more complex and detailed filing, and, certainly, will be closely scrutinized. While you can file your own proofs of claim, we can also do it for you. 

     Creditors must be very careful to fully redact ALL “identifying data” (this includes procedure codes and/or other identifying treatment references for healthcare providers) on court filings to help protect debtors’ vital information from identity theft. Failure to do so will result in a court award of sanctions and attorney’s fees. Several local bankruptcy attorneys are reviewing all proofs of claim in their cases to spot possible violations. I have already had clients who have filed their own proofs of claim and been sued for violations. This is a very expensive problem. 

     Accordingly, I am still offering a “flat rate” fee for filing your proofs of claim and ask that you consider taking advantage of the same. In the end, I think that this will be a less costly and better alternative for you. I will file your first proof of claim in a case for a charge of $250.00. Second and subsequent pleadings for the same case will be billed at one half hour, and one quarter hour respectively. 

     I invite you to please call me so that we can discuss your questions. 

Eddie

Collections: Credit Reports

     Credit reports provide individuals or institutions that have legitimate "need to know" rights with access to important information. This information includes full name, address, social security number, employer, spouse's name, loans, charge accounts, credit cards, bankruptcies, tax liens, and judgments. 

     Credit reports are governed by state laws and federal law - the Fair Credit Reporting Act (FCRA). In addition, the Federal Trade Commission regulates the credit reporting industry. 

     The three largest credit reporting agencies are Equifax, Trans Union, and Experian. There are also several local agencies. 

     Information will remain on credit reports for varying lengths of time: 

  * Chapter 7 Bankruptcies - Ten years from the date of filing, regardless of dismissal or discharge. 

     * Chapter 13 Bankruptcies - Seven years from plan completion. 

     * All remaining negative information - Seven years. 

     * Open accounts in good standing - indefinite. 

     If an individual disputes information reported to the reporting agency, the individual can send notice of the dispute to the agency. The agency will then contact the information provider to verify the information. If the information cannot be verified, it should be deleted. The Agency will then report its findings to the individual. If the individual still disputes the information, the individual may provide a written statement (up to 100 words) to accompany the report.

     If the verification results in a more favorable report for the individual, he may request that the revised copy be sent to anyone who has requested his report within the last six months for credit purposes, or in the past two years for employment purposes. 

Collections: Debt Collections: You Need a Plan, From the Beginning

     Any business or lending institution that extends credit to its customers or members will inevitably be faced with bad debts. To insure maximum collection results, creditors should establish credit and collection policies before a problem occurs. 

     Before you extend credit, there are several things that you can do to reduce your risk. 

     1. Obtain full names, addresses, telephone numbers, places of work, social security numbers and dates of birth. 

   2. Obtain the name of the customer's bank, branch, and account number. 

     3. Review a credit report. 

     4. Ensure that all credit terms are clear. 

     5. Have personal guarantees for small businesses. 

     6. Perfect security interest in events of large credit. 

     When accepting personal checks, take the following precautions: 

     1. Insist on two pieces of identification, at least one of which has the customer's photo. A driver's license and a credit card are ideal. 

     2. Require checks to be made out in your presence. 

     3. Compare the signature on the check with that on the ID. 

     4. Limit checks to the exact amount of the sale. 

     5. Accept only checks drawn on local banks. 

   6. Verify the customer's address and phone number on the check. Also notethe customer's social security number and/or driver's license number.

    7. Be cautious when accepting checks with low numbers (indicating that the account was recently opened).

    8. Consider subscribing to a check verifying service. For a modest fee, such a service allows you to call a toll-free number and learn immediately if you can safely accept the check. If a check bounces after being verified using this procedure, the service will cover your loss.

     When the debt is in default, act promptly! The longer you wait, the harder collection will probably be. The firm of Lafayette, Ayers & Whitlock, PLC usually recommends immediate telephone calls, followed by a series of two or three letters. In the final letter, give a definite and short deadline with the promise of attorney action.

     The decision as to when a creditor should deliver its accounts to counsel for collection is not always an easy one. Some creditors deliver collections accounts to counsel after the initial demand has failed to produce results. Some creditors desire to have their credit/collection manager take their judgment and attempt collection by payment plan, garnishment, or even sometimes, sheriff's levy.

     The problem frequently encountered by creditors who pursue their own judgments, however, is that in most cases the ability to collect without the assistance of counsel ends prior to the receipt of payment in full. When this occurs, counsel must normally assume collection activities after the trail is cold. Further, since the creditor was not represented by counsel at the time of judgment, the judgment order does not include attorney's fees; nevertheless, attorney fees will now be charged to the creditor. In addition, if the creditor's credit/collection manager failed to properly docket the judgment, collection could be forever impaired.

     The firm recommends that creditors immediately deliver accounts to counsel upon the failure of the demand for payment. Creditors should ensure that provisions for attorney fees and interest are included in all loan, contract and/or account documents so that counsel can assess these costs upon delivery. The firm further recommends that all accounts be delivered while the "trail" is still warm--no more then sixty days from default.

     The firm has aggressive collection counsel and staff who represent numerous Credit Unions, Homeowner Associations, property management companies, loan companies, businesses, doctor's offices, and private citizens.