Q:

CAN MY CREDITORS CONTINUE TO HARASS ME?

A:

CAN MY CREDITORS PESTER ME?

Creditors or bill collection agencies (companies that try to collect past due bills), cannot legally call you over and over (harass you) on the telephone. It is also against the law to threaten you with harm or contact you at work after you tell them not to. In addition, the law says that if you write and ask them not to contact you at all, they must stop. Then, they can get in touch with you only to let you know that they are suing you. Be sure to keep copies of all the letters you write.

Creditors and collection agencies are not supposed to contact your employer, except to make sure that you are employed. And, they cannot send you anything that is meant to look like a legal document when it is not.

If you are bothered in any of these ways, you should get in touch with a consumer protection agency or a law enforcement agency. You can also ask a lawyer for help.

Q:

CAN OTHER PEOPLE FIND OUT ABOUT MY DEBTS?

A:

YES, if you don’t pay your bills, you can end up with a bad credit rating, which is a report on your financial situation. Credit ratings are issued by credit reporting agencies. These companies get information about your debts from your creditors, and they make their reports available to others, including creditors, employers and landlords.

A credit reports includes such information as whether you pay your bills on time, have had a foreclosure, owe money as a result of a lawsuit or were convicted of a crime. Each piece of information stays in the report for a certain number of years. For example, a bankruptcy might be listed for 10 years.

What if a store refuses to give a debtor a charge account because you have a bad credit rating? The store must give you the name and address of the credit reporting agency, and the agency must let you see the report.

If you tell the agency that some of the information in the report is wrong, it must look into the matter, if the agency decides that its information is correct, you can explain your side of the story in writing. Then anyone who checks your credit rating will see your explanation. If you ask, the agency also must send your explanation to anyone who received your credit rating for employment purpose in the last two years and to anyone else who received your rating within the last six months.

Q:

CAN I BE FORCED TO PAY SOMEONE ELSE'S DEBTS?

A:

Sometimes you can.

For example, if your spouse obtains a necessity of life — such as food, clothing or medical care-and cannot pay for it, you can be made to pay. This may be true for a former spouse, too, if you were married and not separated when your spouse got into debt.

In most cases, people under the age of 18 can get out of agreements to buy something. However, you are responsible for the debt if you co-sign a contract or loan agreement for someone under 18 or for anyone else. This means you promise to make the payments if the other person fails to live up to their agreement.

What if you co-sign an agreement for someone who ends up filing for bankruptcy? The other person may not have to pay the debt, but you will.

Q:

AS A DEBTOR IN BANKRUPTCY IS THERE ANY PROTECTION AGAINST DISCRIMINATORY ACTIONS OR TREATMENT?

A:

One of the objectives of the Bankruptcy Code is to provide a post-bankruptcy “fresh start” for bankruptcy debtors. The drafters of the Code realized that a serious obstacle to a fresh start for many debtors is the stigma associated with bankruptcy. This stigma is especially damaging to a debtor if it is acted upon by persons in a position to discriminate against the debtor with respect to matters of financial importance, such as employment and the issuance of governmental licenses, permits and grants. To assist debtors in overcoming these obstacles to a fresh start, a section dealing with debtor discrimination was left alone in BAPCPA. §525.

In its present form, then, Section 525 prohibits three basic forms of discrimination against bankruptcy debtors: (1) discrimination by governmental units with respect to employment and with respect to the granting of licenses, permits, franchises and similar grants; (2) discrimination by private employers with respect to employment; and (3) discrimination with respect to the making or insuring of student loans. It should be understood that the discrimination protection provided by Section 525 is applicable to debtors under any chapter of the Bankruptcy Code. Therefore, a chapter 7 debtor, a chapter 13 debtor, a chapter 12 debtor, or a chapter 11 debtor may invoke the provisions of Section 525.

Q:

CAN MY PROPERTY BE TAKEN TO PAY A DEBT?

A:

Usually, a creditor must go to court and win a lawsuit against you before taking your property. However, let’s say you make a written promise to either pay your debt or give the creditor something you owe. The item you promise to give is called a “security”, and the money you owe is called “secured debt”. If you fail to pay a secured debt, the creditor usually can take the security.

Let’s say if you borrow money to buy a car and the car is the security. If you fall behind on payments, the lender can repossess, or take back, the car without going to court. However, the car must be on public property when it is repossessed. Even if the car is repossessed, you still might end up owing the lender money. For example, suppose you owe $8,000 on the car when it is repossessed, and the lender gets only $7,000 by selling the car at an auction. Then, you can be sued for the $1,000 that the lender is out – plus any money spent to repossess the car and sell it.

Q:

WHAT HAPPENS IF I'M SUED?

A:

If you have a secured debt, the creditor can sue you for either the security or the amount of money it is worth or both. If you don’t have a secured debt, you will be sued for the money you owe.

In this event, do not ignore any court summons or paperwork that you receive. This is a paper that says you are being sued. If you don’t respond to the summons and complaint within a certain time, you automatically lose the case – and your property or bank accounts can be taken.

As soon as you receive a summons, you should:

  • Consult a lawyer.
  • Get in touch with a lawyer hired by the person suing you and try to negotiate, or work out, a way to settle the dispute.
  • Be sure and mark your calendar- you must file an answer to avoid a default (usually 30 days- but a shorter time can apply- so see an attorney immediately)

Q:

ADDITIONAL BANKRUPTCY QUESTIONS

A:

Beware of Credit Offers Aimed at Recent Bankruptcy Filers

“Disguised” Reaffirmation Agreement- Carefully read any credit card or other credit offer from a company that claims to represent a lender you listed in your bankruptcy. This solicitation may be from a debt collection company that is trying to trick you into reaffirming a debt. The fine print of the credit offer or agreement will likely say that you will get new credit, but only if some or all of the balance from the discharged debt is added to the new account. You would in essence be bringing a dead debt back to life if you agreed by signature.

“Secured” Credit Card- another type of credit marketed to recent bankruptcy filers as a good way to reestablish credit involves “secured” credit cards. These are cards where the balances are secured by a bank deposit. The card allows you a credit limit up to the amount you have on deposit in a particular bank account. These may be useful to establish that you can make regular monthly payments on a credit card after you have had trouble in the past.

Credit Repair Companies- Beware of companies that claim: “We can erase bad credit.” These companies rarely offer valuable services for what they charge, and are often an outright scam.

The truth is that no one can erase bad credit information from your report if it is accurate. And if there is old or inaccurate information on your credit report, you can correct it yourself for free.

Avoid High Cost Predatory Lenders

Don’t assume that because you filed bankruptcy you will have to get credit on the worst terms. If you can’t get credit on decent terms right after bankruptcy, it may be better to wait. Most lenders will not hold the bankruptcy against you if after a couple of years you can show that you have avoided problems and can manage your debts.

Be wary of auto dealers, mortgage brokers and lenders who advertise: “Bankruptcy? Bad Credit? No Credit? No Problem!” They may give you a loan after bankruptcy, but at a very high cost. The extra costs and fees on these loans can make it impossible for you to keep up the loan payments. Getting this kind of loan can ruin your chances to rebuild your credit.

Mortgage Loans

If you own your home, some home improvement contractors, loan brokers, and mortgage lenders may offer to give you a home equity loan despite your credit history. These loans can be very costly and can lead to serious financial problems and even the loss of your home. Avoid mortgage lenders that:

  • Charge excessive interest rates, “points,” brokers’ fees and other closing costs
  • Require that you refinance your current lower interest mortgage or pay off other debts
  • Add on unnecessary and costly products, like credit insurance
  • Make false claims of low monthly payments based on a “teaser” variable interest rate
  • Include a “balloon” payment term that requires you to pay all or most of the loan amount in a lump sum as the last payment
  • Charge a prepayment penalty if you pay off the loan early
  • Change the terms at closing
  • Make false promises that the rate will be reduced later if you make timely payments

Small Loans

It is always best to save some money to cover unexpected expenses so you can avoid borrowing. But if you are in need of a small loan, avoid the following high cost loans:

Payday Loans

Some “check cashers” and finance companies offer to take a personal check from you and hold it without cashing it for one or two weeks. In return, they will give you an amount of cash that is less than the amount of your check. The difference between the amount of your check and the cash you get back in return is interest that the lender is charging you. These payday loans are very costly. For example, if you write a $256 check and the lender gives you $200 back as a loan for two weeks, the $56 you pay equals a 728% interest rate! And if you don’t have the money to cover the check, the lender will either sue you or try to get you to write another check in a larger amount. If you choose to write another check, the lender gets more money from you and you get further into debt.

Auto Title Loans- For many years, pawn shops have made small high-interest loans in exchange for property. A new type of “pawn” is being made by title lenders who will give you a small loan at very high-interest rates (from 200% to 800%) if you let them hold your car title as collateral for the loan. If you fall behind on the payments, the lender can repossess your car and sell it.

Rent-to-Own- By renting a TV, furniture or appliance from a rent to own company, you will often pay three or four times more than what it would cost to buy. The company may make even more profit on you because the item you are buying may be previously used and returned. And if you miss a payment, the company may repossess the item leaving with you no credit for the payments you made.