All items from Nebraska Debt and Bankruptcy Blog

The 8th Circuit Bankruptcy Appellate Panel denied Kathryn Nielen's application to discharge her student loans, and the result, although discouraging in many respects, is not all that surprising. (Nielsen vs. ACS Inc, No. 13-6034, 8th BAP 2014)  The debtor graduated high school in 1995 and went on to obtain an Associates of Science degree in biology and then a Bachelor's of Science in Health Services Administration followed by a Masters of Business Administration degree in 2001.  At the time she filed bankruptcy she was 36 years old and married with 4 children.  The debtor claimed medical problems due to allergies and mold exposure, but the court did not believe these conditions prevented the debtor from working.
 Several factors were decisive in turning down the application to discharge her student loans:

Posted 4 weeks 3 days ago

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I recently met a client who first learned that she had been sued when she received a post card in the mail from the court indicating that a default judgment had been entered against her.  Frequently I meet clients who first learn of a judgment when their paychecks or bank accounts become garnished.  “How can they garnish me when I never had a chance to go to court!” is the common complaint.
Over 90% of all collection lawsuits result in a default judgment.  Most folks just figure they owe the debt and chose not to contest the lawsuit, even if the amounts are wrong.  However, a big reason for default judgments is that the defendant moved and the lawsuit summons was served at an old address.  So, when the Sheriff cannot serve the lawsuit because the has defendant moved the Sheriff will typically file a report with the court that says “attempted to deliver, defendant not found at this address, unable to deliver summons.”  The Sheriff typically does not report that the defendant has moved to another address, he just reports that the defendant could not be served.
The Problem of Alternate Service: 

Posted 8 weeks 2 days ago

The 8th Circuit Court of Appeals has ruled that a homeowner has a private right of action to sue their mortgage lender when the bank fails to properly process the application.  Topchain v JPMorgan Chase, No. 13-2128 (8th Cir. 2014).  This is a significant case because the HAMP laws do not specifically state whether a homeowner may sue their mortgage company when the bank wrongfully refuses to offer a permanent loan modification. Sure, HAMP laws require the banks to modify certain mortgage loans, but what do you do when they refuse to follow the law?  According to the 8th Circuit, you may sue them for breach of contract.
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Under the Home Affordable Modification Program (“HAMP”), an eligible homeowner receives a Trial Period Plan (TPP) that typically requires the homeowner to make 3 modified payments.  If the TPP payments are made on time, the homeowner then receives a permanent loan modification agreement. 

In an amazing display of arrogance and bad faith, Chase argued that no contract was ever formed because it did not sign the agreement.

Posted 10 weeks 5 days ago

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It costs a lot of money to go broke, literally.  Chapter 7 fees vary from case to case, but the average case filed in Nebraska ranges from $1,200 to $1,500 depending on the complexity of the case and the attorney hired.  Clients frequently ask if their case can be filed before all fees are paid.  The clear answer to this question is no.  Bankruptcy laws simply do not allow an attorney to accept payment of Chapter 7 legal fees after the case is filed.
A recent case involving Louisiana bankruptcy attorney Glay Collier underscores this rigid rule.  Collier advertised a “No Money Down Chapter 7” where he would charge $100 before the case was filed and then debit his client’s bank account for the remaining fees to be paid after the case was filed.  It goes without saying, an attorney can file a lot of cases for no money down, and Collier did just that.  Unfortunately, when a client failed to make the monthly payment Collier retaliated by failing to file necessary documents and the case was dismissed.  The client hired another attorney and sought damages. 

The Louisiana bankruptcy court imposed $40,000 of sanctions and damages against attorney Collier

Posted 12 weeks 3 days ago

The Consumer Financial Protection Bureau has filed a lawsuit against the debt collection firm of Fredericak J. Hanna & Associates and its three principal owners "for operating a debt collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe."  The CFPB complaint alleges that the Hanna firm files thousands of lawsuits that are based on faulty or unsubstantiated evidence.
According to CFPD Director Richard Cordray the Hanna firm is “taking advantage of consumer lack of legal expertise to intimidate them into paying debts they may not even owe.  Today we are taking action to put a stop to these illegal debt collection practices.”
The CFPB alleges that the Hanna firm “operates like a factory” by producing hundreds of thousands of lawsuits without any meaningful attorney involvement against consumers who may not actually owe the debt.  One attorney at the Hanna firm signed over 130,000 lawsuits in a two-year period which the CFPB says is misleading to consumers since no attorney could actually review that many lawsuits for accuracy.

Posted 22 weeks 1 day ago

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The United States Supreme Court has ruled that inherited Individual Retirement Accounts (IRAs) are not protected under federal exemption laws.   Clark  v. Ramekers, 573 U.S. ____ (2014).  Even though inherited IRAs are exempt under federal income tax laws, the court said they are not really “retirement funds” under Section 522(b)(3)(C) of the Bankruptcy Code.  Justice Sotomayor cited three key legal characteristics of inherited IRA accounts that are exactly opposite of how normal retirement funds operate:

Posted 26 weeks 2 days ago

A report issued by the Consumer Financial Protection Bureau (CFPB) found that a debt buyer dismissed 70% of its lawsuits when the consumer filed a written answer to the lawsuit. 

As part of a debt collector examination, Supervision reviewed collection lawsuits initiated by the entity. Examiners found that in 70% of the cases, when the consumer filed an answer, the entity would dismiss the suit because it was unable to locate documentation to support its claims.

Junk debt buyers purchase nothing more than a list of names and amounts owed, but they do not receive any real proof of the debt.  They receive no copy of the credit card contract, no record of the payments and charges to the account, no copy of the multiple amendments to the contract, no evidence of whether the contract is written or oral, and no explanation of of how the finance charges were calculated. 

Despite the entity’s express or implied representations to consumers that it intended to establish that consumers owed a debt in the amount claimed in court filings, in numerous instances, the entity misled consumers because it demonstrably had no such intention.

Do we have consumer fraud issue here?  Debt buyers are intentionally misleading consumers by filing lawsuits they have no intention of litigating since they lack meaningful proof of the debt.

Posted 29 weeks 1 day ago

I will be attending the American Bankruptcy Institute's Student Loan Debt Crisis Symposium being held in in Washington DC on May 30.  The timing of this event could not be better.  The student loan problem keeps getting worse and it is high time that bankruptcy practictioners create workable solutions for the millions of Americans who are trapped under the weight of these debts.  The common belief that student loans are never dischargeable is absolutely not true.  What is true is that Courts are looking at these debts with fresh eyes and the lenders have created new options to help struggeling borrowers. 
If you are attending this conference or if you have questions regarding student loans please contact me.
Sam Turco

Posted 38 weeks 7 hours ago

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What happens when a bank cannot produce a copy of their credit card agreement during a lawsuit for an unpaid account balance?  Well, that was exactly the situation when CitiBank sued Teresa Cooper in the Superior Court of Vermont, and that case typifies the current status of credit card lawsuits nationwide.  Banks cannot seem to produce a copy of their contracts when litigating unpaid accounts.
What CitiBank was able to provide the court was a copy of the monthly billing statements mailed to its customer and the bank sought to recover a summary judgment on the legal theory of Account Stated.  In short, the account was stated month to month via the billing statements, no objections were made by the borrower, so the balance must be true.
Amazingly, credit card companies have tremendous difficulties producing a copy of the written contract. This is because the contract is not contained in one document but is a result of several documents, perhaps dozens or hundreds of documents, generated during the time the account exists that must be read together to come up with the terms of the agreement. 

Posted 46 weeks 6 days ago