CAPITAL ONE ADMITS WRONGDOING AND PAYS A LOT OF MONEY

Many people are calling for the abolition of the Consumer Financial Protection Bureau (CFPB) which was only recently formed. Why would an agency, charged with the protection of consumers and charged with deterring deceptive practices by lenders be opposed by so many people?

Many people feel that the recent recession was caused, at least in part, by the monied banks and lenders. Many people believe that there was substantial wrongdoing by the banks and other lenders. Many people also believe that the lenders and banks got off without any punishment. All the help went to the banks and very little help has been given to the middle class.

The CFPB is trying to level the playing field. It has brought an action against Capital One claiming that Capital One used deceptive practices to separate people from their money. The action filed by the CFPB used the deceptive practices to take over $150,000,000.00 from people and add to the profit of Capital One.

In this situation, Capital One allowed vendors to sell services to the customers of Capital One. The CFPB is claiming that Capital One gave third party vendors access to its customers. Because the vendors were able to come to the customers of Capital One, there was an implied approval by Capital One that the vendors were good people.

In fact, the vendors used tricks and other deceptive practices to convince the customers of Capital One to purchase goods or services.

A consent order was issued that describes in detail the violations that formed the basis of the CFPB’s action. A consent order is a document that is signed by both parties which means, Capital One has admitted that it broke the rules.

It is expected that more actions will be coming. So why are people wanting to abolish an agency that is punishing a business that injured people using deceptive practices?  Capital One admitted it was wrong and paid money as a result of its wrongdoing.

  • THE ANSWER TO THE QUESTION IS SIMPLE

The banks and lenders are unhappy that someone, anyone is holding them accountable. The banks and lenders are terrified that many other actions will be brought against other wrongdoers.  They know that they have engaged in some of the same bad practices.  The banks and other lenders want to get rid of an agency that holds them accountable for their actions.

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WILL MORTGAGE FORGIVENESS HURT MORE THAN IT HELPS?

A settlement has been reached between several of the mortgage companies and the United States Government regarding bad lending practices. As a part of the settlement, the balance owed on certain loans is being forgiven.

How can it be bad if a creditor forgives the debt on your home?

FORGIVENESS OF INDEBTEDNESS MAY COST YOU A LOT OF MONEY

Under the tax code, when a creditor decides to forgive the repayment of money that you owed to the creditor, this is a taxable event.  For tax purposes, this is treated the same as if your boss suddenly gave you a big bonus check.  If the amount that the creditor is forgiving is $100,000.00, then you may now have added to your real wages earned in the year that the debt was forgiven which in this example is $100,000.00. You have had no with holdings on this amount and all of a sudden, you have a huge tax liability.

WHAT SHOULD YOU DO IF YOU ARE OFFERED THIS FORGIVENESS?

You only have 30 days to reject this offer. If the amount that is being forgiven will cost you a lot of tax dollars, you may want to refuse the offer. You should contact your tax professional at once to determine how you should act.

WILL FORGIVENESS OF DEBT ALWAYS CAUSE YOU TO OWE TAXES?

The easy answer is no, there is not always a tax consequence. Your tax professional can determine if you qualify for one of the many exemptions that may keep you from owing taxes. You do not want to wait until it is time to file your tax return to find out what the result of this forgiveness will be for you.

If you are receiving monies based on your income, you might even lose the benefits or have to pay back money you received.

CAN YOU WAIT UNTIL I RECEIVE A 1099 FROM THE LENDER TO WORRY?

Do not wait to receive the 1099 to find out where you stand. Federal law requires that your lender send the 1099 to you if more than $600.00 is forgiven. You can bet that the lender is not going to pay fines for failing to send and file these documents with the proper tax authorities.

The second problem is that the lender is not required to send the 1099 to you until after the first of next year. The tax liability arises in the year the debt is forgiven, not, the year when you receive the 1099.  Things you may be able to do to keep from having a large tax liability have to be done, in most cases, in the same tax year as when the debt was forgiven.

WHAT HAPPENS WITH A TAX LIABILITY WHICH YOU CANNOT AFFORD TO PAY?

Lots of bad things such as being subject to tax liens, wage garnishments or other collection actions. You may have benefits taken or reduced that you are relying on to live. The ability of the tax folks, both state and federal, to take your assets is many times greater than any non-governmental lender.

WHAT SHOULD I DO TO PROTECT MYSELF FROM THIS TAX PROBLEM?

A resort that you may not like is to file bankruptcy in the same year that the debt was forgiven. This means that if the debt is forgiven in late 2012, you only have a few months to avoid the tax liability.  Under the Bankruptcy Code, if you file bankruptcy, the forgiveness of income tax liability ceases to exist if you file bankruptcy before the tax liability is established.

This is not the result if you file bankruptcy in 2013 to take care of a tax liability incurred in tax year 2012. In fact, tax liability incurred for tax year 2012 is not dischargeable for a long time after the 2012 year.

For more information on this matter, contact an attorney such as myself to make sure you protect yourself.

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ARE ASSETS LOST WHEN A DEBTOR DIES BEFORE THE DISCHARGE IS OBTAINED

If a bankruptcy is filed and then the debtor dies, can the discharge still be obtained is a question that is asked more than one would think.  A Chapter 7 bankruptcy case can take 5 or 6 months to complete.  A Chapter 13 bankruptcy case will often last 3 to 5 years.  The minimum time a Chapter 13 case is going on is three years unless all unsecured  creditors have been paid in full before the three years of payments have been made.

The Bankruptcy Code allows the continuation of a bankruptcy case if the debtor dies in most situations.  You may wonder why it would be important to obtain a discharge for a deceased debtor.  The fact is, most of the time, the bankruptcy case did not cause all of the debts of the debtor to be paid in full.

WHAT HAPPENS IF NO DISCHARGE IS OBTAINED?

If no discharge is obtained, the creditors can go after the assets of the debtor in the Probate Court proceeding.  This means that the heirs of the debtor may lose property that the debtor wanted his or her family to have if he should die.

Debtors want to be able to provide for their heirs.  The decision to file a bankruptcy case is never taken lightly.  Debtors all feel like they are somehow failures when they file a bankruptcy case.  No one ever started a business, took a job, got married or had children so they could have to file bankruptcy.  It is human nature to believe that you are going to succeed at what you are doing.

HOW IS A DEATH OF A DEBTOR HANDLED IN A BANKRUPTCY CASE THAT IS ONGOING IN THE DISTRICT OF SOUTH CAROLINA?

The Bankruptcy Court has recently addressed this issue in a case here in South Carolina.  The Bankruptcy Court found that if a debtor died, the Personal Representative or person appointed to handle the estate of the debtor should petition the Court for permission to continue the bankruptcy case.  This is a small change in the District of South Carolina, but, it does not appear to be a problem.  The Bankruptcy Judge ruled that a motion should be filed to allow the Personal Representative to continue the bankruptcy case.

This allows the Bankruptcy Judge to determine if this is the proper case to allowed to continue being administered by the Bankruptcy Court.   This makes sense as the Bankruptcy Judges actually manage their cases as part of their duties.  Knowing about this issue soon after the death of the debtor allows the Court to make the proper determinations in a timely manner.

Bankruptcy Rule 1016 sets forth what will happen in a Chapter 7 case.  This rule directs that the liquidation of the debtor’s assets will continue as if the debtor had not died.   Only in a very rare situation will the Chapter 7 Bankruptcy Case be dismissed because a debtor died.

In a reorganization case under Chapter 11, Chapter 12 or Chapter 13 of the Bankruptcy Code, this same rule states that the case may be dismissed, or further administration of the case is possible and in the best interest of the parties, then the case may be continued.   If the Court determines that the case should be continued, the case is concluded to the extent possible, as if the debtor had not died.

Many times in a reorganization case, the debtor was behind on payments to a creditor and was trying to keep an asset such as a car or house.  Most of the time, the debtor was significantly behind on payments to the creditor.   If the case was dismissed, the creditor would be entitled to either be caught back up at once, or the creditor could foreclosure or seize the property.

Many times, the family of the debtor will continue the payments to keep the property.

What happens when a debtor dies during a bankruptcy case is never a simple matter.  Using competent attorneys for advice may allow the family to keep their property.

 

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ANNUITY AND RETIREMENT EXEMPTIONS UNDER SOUTH CAROLINA AND BANKRUPTCY LAW

There are numerous annuity and pension exemptions under South Carolina law that can also be used to protect your pension or annuity if you file a bankruptcy case.  What this means is that you are allowed to keep the money received from a pension or annuity even if you owe a creditor.

The following are some of the pensions or annuities that are covered.

The right to receive an annuity or a retirement allowance or the return of contributions, any optional benefit or any right accrued or accruing from the South Carolina Retirement System, the Retirement System for Judges and Solicitors, the Retirement System for the General Assembly, the Police Officers Retirement System or any private retirement system operated by a municipality.

What this means to you is that a creditor cannot force you to give any part of this money.  If you voluntarily give it to the creditor, the situation is different.  You need to understand that a creditor or debt collector is not going to tell you that you do not have to pay money.

A creditor or debt collector job is to collect the maximum amount of money that can be taken out of the funds of a debtor.  Most creditors use collectors who are paid at least in part on the amount money collected.  The job of collector, whether working for a creditor directly, or working for a debt collector is never a fun job.

If a someone calls you trying to collect money and becomes rude, nasty, demeaning or claims that you will go to jail if you do not pay at once, know that you need to hang up and immediately contact an attorney.

Remember, that you need to obtain certain information when the call comes in.

The information needed is as follows:

  • NAME OF THE PERSON CALLING:

No creditor or debt collector can actually make a phone call.  They all have people call.  Get the name of the person calling.  If the caller will not give you a name, then you need to hang up the phone.

  • NAME OF THE COMPANY CALLING

There are lots of companies that may try to contact you.   If you receive a call, make sure that you have the exact name of the company calling.  Many collectors use similar names so that confusion may occur as to what company was actually calling you.

  • DATE AND TIME CALL RECEIVED BY YOU

Creditors record most of the calls that are made when they are trying to collect a debt.  Having the date and time the call was made allows your attorney to obtain a copy of the telephone call made to you.  The same system that does protect the collectors from frivolous claims will also cause them to prove that the offending call occurred.  Not having to go though days of messages saves you money on finding the actual recording.

  • TELEPHONE NUMBER

Although collectors will use many different phone numbers, always request a number to call back to the collector.  Remember, however, that the number you are to call back to the collector may not be the same as the number the creditor used to call you.

If you have questions about your rights, contact an attorney such as D. Nathan Davis who will be happy to discuss matter with you.

 

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FRATERNAL BENEFITS EXEMPTIONS UNDER SOUTH CAROLINA LAW

South Carolina law exempts Fraternal Benefit Association Benefits from claims from creditors who may claim that you have to use them to pay the creditor money that is owed to them.   Just because you have a benefit that is claimed comes from an organization, there are many requirements that must be met before you should assume that the benefit being paid to you is exempt.

The requirements for the money to qualify as exempt are fairly complex.  I will attempt to list those requirements as follows:

REQUIREMENTS FOR AN ORGANIZATION TO QUALIFY AS A FRATERNAL ORGANIZATION WITH EXEMPT BENEFITS

  • The organization must be incorporated
  • The organization cannot be one that is owned by stockholders.
  • Operated as a not for profit entity.
  • The organization is operated solely for its members and its beneficiaries.
  • There is a lodge system with ritualistic form of work
  • A representative form of government
  • Its members receive benefits as set forth in its rules
  • The organization is a fraternal benefit society.
  • There is a supreme governing body and subordinate lodges
  • Each member has only one vote

THE FRATERNAL BENEFITS EXEMPTION AND BANKRUPTCY

If you file a bankruptcy under Chapter 7, Chapter 11 or Chapter 13 of the United States Bankruptcy Code, your benefit will still be protected from seizure by your creditors or a Trustee.  For this reason, you will not have to worry about losing this benefit if you file bankruptcy.

KNOW WHAT YOUR RIGHTS ARE WHEN DEALING WITH CREDITORS OR PLANNING YOUR FUTURE

Planning for your future is important.  You cannot make the plans you need to make without knowing all the facts and rules.  Contact me, Nathan Davis, to discuss the plans to make if you are experiencing financial difficulties.   Planning may help you escape your financial problems or lessen the financial impact of the financial problems.

 

 

 

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FIREMAN’S PENSION FUND PAYMENTS AND EXEMPTIONS UNDER SOUTH CAROLINA AND BANKRUPTCY LAW

Creditors and debt collectors will tell you anything if they think that you do not know better.  If you are eligible for or receiving a Fireman’s Pension Plan payment, the creditor or debt collector may demand that you send part of the money you receive to pay a debt that is owed.  Before you send the money, contact an attorney to find out your rights if you do not send the money as demanded.

  • FIREMAN’S PENSION FUND PAYMENTS ARE EXEMPT FROM SEIZURE

    Funds received from a Fireman’s Pension Fund established by a city are exempt from seizure by a creditor or debt collector in a South Carolina Court proceeding.  These funds are also exempt from the creditors and/or a Trustee in a Bankruptcy Court proceeding.
    This provision only protects funds from a Fireman’s Pension Fund that are established by a city or municipality.  Not all fireman are protected under this type plan.  If the pension plan or fund you are receiving monies from is a different type, then the monies may be protected under a different section of the South Carolina Code of Laws.

    WHAT HAPPENS IF YOU GIVE A CREDITOR A PAYMENT FROM THESE FUNDS?

    If you give these funds to a creditor or debt collector, South Carolina Law will not help you get the money back.  There are exceptions if  you paid the money under duress or because the debt collector or creditor lied to you.
    Misrepresentation or threats are improper debt collection actions. You should see an attorney who may be able to bring an action to punish the creditor or debt collector for its bad conduct.
    You have rights although many creditors will deny that you do.
    If you do not want to talk to a creditor, tell them that and hang up.  You do not have to be nice, pleasant or courteous to a creditor or bill collector.  If a creditor is rude, threatening or abusive, do not put up with such conduct.
    Remember, whenever a creditor or debt collector acts improperly, you need to obtain the name, contact information and the date and time of the call.
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