Friday, April 2, 2010

It Pays to Fight Your Creditors!

Take the following two cases of debtors being sued by creditors:

Second Case: Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.

“After paying my monthly utilities, there is no money left except a little food money and sometimes it isn’t enough,” she wrote.

Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900.

But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover’s actions “unconscionable” and threw the case out.

Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial.

These settlements may be against the interests of debtors, but they sign anyway.

“We’re signing off on a lot of settlement agreements where we shake our heads and ask, ‘Why is this person settling to this?’ ” Judge Lipman said.

Second Case:

For the working poor, losing a lawsuit can mean disaster.

The case of Sidney Jones shows how punishing the system can be. In January 2001, Mr. Jones, 45, a maintenance worker from California Crossroads, Va., took out a $4,097 personal loan from Beneficial Virginia, a subprime lender now owned by HSBC, the big bank.

He fell behind, and Beneficial sued. Mr. Jones did not appear in court.

“I just thought they were going to take what I owed,” he said.

By default, Beneficial won a judgment of $4,750, plus $900 in lawyers’ fees, with the debt accruing interest at 27.55 percent until paid in full. The bank started garnishing his wages in March 2003.

Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt.

According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount. Mr. Jones, who did not graduate from high school, was baffled.

“Where did all this money go that I paid them?” he said. Dale Pittman, a consumer law lawyer in Petersburg, Va., took Mr. Jones’s case without charge, and found that all but $134 of his payments had gone toward interest, fees and court costs.

“It’s a perfectly legal result under Virginia law,” Mr.Pittman said.


So, which way will you go? Lay down like a dog and get run over or stand up and defend yourself?

If you need help, contact me, Bill Young. I am a former bank loan officer and have many clients who have been able to Beat the Banks!

Call for a free consultation on your situation.

Bill Young, Personal Financial Consultant


Current DateTime: 09:22:23 02 Apr 2010
LinksList Documentid: 22528754
BusinessDealBook BlogSmall Business News
A 1968 federal law exempts 75 percent of a worker’s wages, or 30 times the minimum wage per week, from being taken in garnishment — whichever is less. But increases in the minimum wage have failed to keep up with inflation.

As federal law stands now, just $217.50 a week is exempt from seizure. (A few states set higher cutoffs.)

The working poor “have difficulties maintaining payments on life’s necessities with their full paycheck,” said Angela Riccetti, a lawyer with Atlanta Legal Aid who represents indigent clients whose wages are being garnished.

“You lose 25 percent of it and everything folds.” For Leann Weaver, the woman at the grocery store, Capital One’s lawsuit made a bad situation worse.

After being evicted from her apartment, she moved in with her grandparents. Without them, she might have ended up on the street or in a shelter, she said.

Capital One declined to comment on Ms. Weaver’s case.

“We encourage anyone facing difficulties meeting their financial obligations to contact us right away,” Tatiana Stead, a bank spokeswoman, said in an e-mail message.

Ms. Weaver said she repeatedly asked Capital One for more time to pay her $2,470 debt, but last year the bank filed suit.

She failed to show up in court, and a judgment was entered against her, swollen by $1,800 in interest and lawyers’ fees.

Then the garnishment began, almost $500 a month, or a quarter of her pay.

“I can’t even look at my paychecks any more,” she said.

This story originally appeared in the The New York Times
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12 Comments TotalCOMMENTSRadical_1 | Apr 2, 2010 12:37 PM ET

Just proves the point "at least show up for Court". While you might not win at least you'll leave knowing how bad you're going to get screwed, where if you don't go at all, you have NO IDEA what happened, or how bad the Court ruled against you. One thing is guaranteed in a Court of Law, if you don't show up you'll NEVER WIN.
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mcleert | Apr 2, 2010 01:05 PM ET

But it is ok for the same banks to not pay down their toxic debts and get a free % loan from the government to do as they please !!!!

Time for a national consumer law suit against all
the too big to fail banks.

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WaitForTheRevision | Apr 2, 2010 02:37 PM ET

Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt.

According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount. Mr. Jones, who did not graduate from high school, was baffled

LOL "who did not graduate from high school" Why throw that in here? Reporter "So Mr. Jones you seem to be uneducated would it be safe for me to ASS-U.M.E. that you didn't finish H.S.? Ahhh.. Haaa I knew it! LOL. It sounds like a simple BK filing would have saved these people cash. But yet here they are paying 500 percent more than they should and still have balances and bad credit. Credit is a scam that is sold to us and used for control. Pay cash it's better.
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magnets | Apr 2, 2010 02:52 PM ET

Laws have been written to declare what is owed and to demand interest and fees as well. Then people can be harassed as long as possible and perhaps additional monies can be obtained.

Unfortunately during the process a lose-lose situation is turned into a lose-lose-win situation. The debtor still loses, the original creditor still loses and the only possible winner is a third-party that wears the debtor and the system down just to collect as much as possible on their original small bet - paid to the original creditor by the third-party.

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magnets | Apr 2, 2010 03:18 PM ET

Let's see, the ADULT in the room should be the judge. Neither Democratic nor Republican judges seem to understand that. (Yes, politics is unfortunately now well embedded in the court system.)

People have no respect for the system. And why should they? They know they owe the debt. They would love to pay off the debt if they could. The reason they have the debt in the first place is because it was easy - not because they could afford it. They assume the judge will be fair. Unfortunately they do not know that the judge demands respect in order to be fair. You have to show up. No wonder people have no respect for the system.

Credit Card companies should raise and lower limits on a monthly basis. 20% usage is OK. 80% usage and the card gets rejected the next time use is attempted. Fixing the problem early might mean the third-party never needs to get involved.

Which would creditors rather have in the economy, people buying things or people paying penalties and fees they can not afford? Politicians should prefer consumers over debt collectors.

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curlqgurl | Apr 2, 2010 04:52 PM ET

I lost my job and offered Captial One 15 percent and $100 per month on a bill of $1300.
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RayRock. | Apr 2, 2010 04:56 PM ET

Show up and ask to see the original documents that prove a debt exists and that they’re authorized to collect on it. If they cannot do that then ask the judge to order them to compensate you for your time and to find in your favor and order them to cease pursuing the claim and to prohibit them from selling the debt to anyone else. It may or may not work, but it never hurts to ask.

On another note though I see this as just the beginning as soon we’ll see lenders with foreclosed homes on their hands suing those who defaulted. The lenders will scrutinize the loan documents and if there are any lies I expect lenders to sue for fraud and probably file criminal complaints as well in the very near future.

It’s about to get ugly for debtors and it’ll take years for the cases to work their way through the courts.

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RUOK2 | Apr 2, 2010 05:40 PM ET

Very Very Sad, that Banks were bailed out, rescued by the Taxpayers...while the banks then increased interest rates on credit, stop making loans, and play all types of accounting games to make their book look good....and what does the consumer and small business person get....SCREWED......revolt against monster banks like Citi Group , Bank of America, JP Morgan Chase.....Put your money in a local community bank that cares for the community, and WAll Street and stock prices.......Its all very sad...
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gliding | Apr 2, 2010 06:02 PM ET

No court should ever allow usurious interest rates in such cases, whether the defendant shows up or not. More than 10% is questionable. More than 18% is outrageous.

And if the defendant doesn't show up, then the plaintiff should pay the legal and court fees of bringing the suit, for it poses a disincentive for abuse.
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HLJ63 | Apr 2, 2010 06:35 PM ET

Some people think that ignoring the problem will make it all go away, like there is this kind fairy out there who waves a wand and poof! All of your debt is gone. Sorry but that fairy only appears for the Big banks who are able to tuck away their toxic assets and debt as if they don't exist.
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