Archive for December, 2012

PART TWO OF NEGOTIATING PARTIAL CREDIT CARD SETTLEMENTS

If you read the last article, you understand the basics of negotiating partial credit card settlements. Now that you know the basics, it is time to start the card game. And I feel obligated once again to advise you not to do this yourself, but to hire a lawyer that you know, and that has a good reputation. But if you decide to do it yourself, you’ll benefit by understanding some of the tactics successful negotiators have used.

Before you begin, you MUST have the money you will use to settle the credit card debt immediately available. Don’t have it in an IRA, stock fund, mutual fund, pension fund, or any other kind of form of money that is not available to send to a creditor any day you work out a deal.

In this scenario, let’s say that you owe your Bank of Iran credit card $10,000. You have been making minimum payments for several years, but the amount due stays right around the maximum $10,000 limit. You lost your job about a year ago, have quit making the minimum payments since, and Uncle Joe says he’ll loan you $3,000 if it will help you pay-off the debt. It would probably be best to confirm that Uncle Joe will give you that money any day you ask for it, rather than taking it now and putting it in your bank while several creditors might be trying to get the money.

WARNING – If the Bank of Iran sues you, and gets a judgment, they can “freeze” your bank account, and you and Uncle Joe both could lose the $3,000 if it is in your account. But in order for the bank to do that, unless the fine print of your credit card contract permits (I’ve never seen one that did, nor have I ever met anyone who ever read all that fine print), the Bank will have to get a court order to access your account.

Now that you have a third of the amount you owe on the credit card, and the funds are liquid (you can get them any time you want), it is time to play a card. Call the credit card company, tell them that you can get money from a relative, and would like to pay off the card in full if the company will agree to reduce the amount owed. Start at an offer of 20%, and the representative (get his name and phone number, and always work with him when you call) who answers the phone will probably refuse to accept the offer. Remind the operator to make, along with the note on his computer that you have made the offer, a note that you are considering filing bankruptcy – and if you file, because the credit card is unsecured (you pledged no collateral to get the credit), and you have no significant equity, property, or money – that your filing a Chapter 7 bankruptcy, could result in the credit card company getting nothing. Politely remind the operator that you can get the $2,000 anytime they want to make a deal, and if they do, to give you a call.

If the credit card company doesn’t call you within 30 days, or if they do call you, you can expect that they will agree to settle the debt if you can pay 50% of the amount owed, or $5,000. Explain that Uncle Joe said that he will give you $3,000, and that’s all you can pay (or if you’re ready to fold your hand, and can get the full $5,000 – take the deal). If you persist with the $3,000 offer, the representative will refuse. Remind him that you have the money and can send it to him any time he wants.

Give it a few weeks, and if you don’t get a call from the company, call them. Again make the $3,000 offer to the representative, remind him you can use the money from Uncle Joe to file bankruptcy, or give it to the Bank of Iran. If the operator again refuses, ask for his supervisor.

Either during your conversation with the supervisor, or at a later time, the credit card company may agree to your offer – if you agree to wire the money to the Bank of Iran right now. Remind the company that you have been advised never to send money by wire, but that you can over-night to them a cashier’s check, if they will make the offer to settle the debt in full in writing (have them send you a fax). If you decide to send the money – and remember that I advised you to hire a lawyer to handle this dangerous transaction – make a notation on the check where the Bank will sign it, “Bank of Iran account (list #) paid in full, never late.” This is called a qualified endorsement that you may be able to use to clear up your credit rating regarding this credit card. When the Bank of Iran accepts the check, they are doing so in acceptance of the condition you have written as the qualified endorsement.

But, here’s why bankruptcy is the preferred method of settling such matters, especially if there are many different credit companies involved – remember that $7,000 debt the Bank of Iran is agreeing that you do not have to pay? Uncle Sam will consider that $7,000 of income for that year, and you will be charged taxes for that $7,000 amount. If you are in the 15% tax bracket, that’s over a thousand dollars that you will owe in addition to your regular taxes for that year (so remember that when you’re borrowing the money from Uncle Joe). When you file bankruptcy, you are not taxed on debts that are discharged.

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NEGOTIATING PARTIAL CREDIT CARD SETTLEMENTS

You’ve fallen behind on your credit card payments, and now there are several companies threatening to take you to court. But fortunately, a friend, or relative tells you that he or she will help you out by giving you some money to pay off the accounts, and you would like to do so at the least amount possible. How is it done?

First of all, let me advise you to hire a lawyer. If you are paying out several thousand dollars to numerous creditors, you will be traveling through a mine field that can result in disaster if you are not careful. If you still want to try, you need to understand a few points about the credit card business.

If you owe $4,000 to a credit card company, at 20% interest, you have faithfully been giving them $50 per month for a few years now, and you call them up to ask the company to settle your debt for $800, paid immediately, your request will probably be denied. The company knows that you are a good customer, and with those small payments at that large interest rate – they’ll make a lot more from you if they wait for years of payments. The credit card companies have access to your credit report, and if it shows that you have always been current on all your debts, the company has no reason to accept less than the full amount you owe.

It is the debtors who are ready for bankruptcy that are most likely to be successful settling debts with creditors. The debtors who have fallen behind on payments to creditors, have accounts that have been turned over to collection agencies, and have been repeatedly threatened with law suits may have the best chance to settle debts. Add to these circumstances, a windfall of income, such as a life insurance policy payment, an inheritance, or a gift of great value, and bankruptcy becomes less attractive to the debtor, and a credit card settlement becomes more beneficial to the debtor.

If you have been current with your debt repayments, don’t expect creditors to settle for less than nearly the full amount owed them, but if you have fallen behind on nearly all your debts, and the creditor believes you to be a candidate for bankruptcy – in which the creditor will probably get nothing – the creditor might be interested in settling your debt.

Before we discuss the mechanics of such an endeavor, now is a good time to warn you about disreputable debt settlement agencies. Many of them will make promises to you to work out all your debts at twenty cents on the dollar, and set up a payment plan for you to begin paying the settlement agency. You may not understand that the first $2000 you pay to that agency will be for the agency’s fees, and until you pay that amount, no money will be paid to the creditors. You might pay half of that $2,000 and still get a summons to court from a creditor who is ready to collect – NOW! If you run out of money before you pay the full amount the settlement agency needs, they may not be able to help you, but will probably still keep their service fee (here, the $2,000).

Be wary of such agencies, and their promises, and be sure to read all the fine print before contracting with them. I would suggest contacting a local lawyer with experience in debt settlement. Find a local attorney with a good reputation. Look for one that will meet with you in person, and that will discuss the details of the agreement you will sign.

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ILLINOIS WAGE GARNISHMENTS

When credit card companies and medical service providers “turn this account over to our collection department” the debtor may soon be threatened with a wage garnishment. It may be useful to you to understand more than the creditor wants you to understand about Illinois garnishment law.

A wage garnishment is a court order permitting the creditor to receive a portion of the debtor’s wages in satisfaction of a judgment saying that the debtor owes the creditor a certain amount. If you have read my past articles (if not see the last paragraph below) you remember that a voluntary wage assignment is in essence a garnishment that is not ordered by the court, but is agreed to by the debtor – and can be cancelled by the debtor. For a wage garnishment to occur, if you have not entered into an agreement permitting the garnishment, the creditor must file a claim for money owed him, in court. If the creditor has your correct address, you will receive a summons, informing you that the creditor has filed a lawsuit against you to collect the amount he believes you owe, plus interest, plus court costs, plus attorneys’ fees.

The creditor must get that court judgment to garnish your wages. After the judgment, he will file a citation to discover assets in which you will be required to provide the court and the creditor with a statement of all your assets. If your income is from self-employment, there is no wage to garnish. If your income is from a government pension or benefit, it is not a wage, and cannot be garnished. But if you have an employer, and receive a periodic wage, your income can be garnished. Just because the creditor can’t garnish your wages does not mean he cannot collect the amount owed. He can freeze your bank account, or put liens on property.

In this state, if your weekly gross salary is $371.25 or less, it cannot be garnished. If it exceeds that amount, the garnishment will be 15% of your salary after necessary deductions like state and federal taxes, or mandatory pensions. If you have child support payments deducted from your check for two or more children, and you are already paying more than 15% of your gross income for child support, a creditor cannot be paid by garnishment until the support payments end. If you have one child, your deduction for child support should be about 15 % of your net income. The child support and the creditor wage garnishment cannot exceed 25% of your net income.

During the period of the garnishment, you will be required to pay the garnishment amount. It will be a specific amount. Many credit cards are at exorbitant interest rates. You will owe that interest rate for the time up to the court judgment, but after that date, there is a statutory interest rate available to the creditor of 9% of the unpaid balance.

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ILLINOIS SMALL CLAIMS COURT COLLECTIONS

The problem with a small claims court judgment is that the judgment in your favor is probably no better than the word of the person you are suing. If you go to court, and win because the judge says you are right, or because the defendant fails to attend the hearing after proper notice – you will have a court judgment saying that the defendant owes you money. You will not have the money, unless the defendant agrees to give it to you. But you will have a court order that you can get enforced if you follow the correct procedures and the defendant can afford to pay.

Collecting a small claims judgment, or any other judgment, is a totally separate area of the law. You might find yourself able to win a small claims judgment, but unable to collect the debt. The Williamson County Circuit Clerk provides you information about collections, but to collect, you might need to see an attorney who specializes in debt collection.

If you win in court you should send the defendant a copy of the judgment (if he doesn’t get one in court) and tell him that you are going to do whatever the law permits to collect the money that is owed to you. You might say that you are willing to accept less than the total judgment if the defendant pays you immediately, or pays an agreed to amount periodically.

If you and he cannot work it out, or if the debtor fails to keep his agreement with you, the next step is to file with the court, a “citation to discover assets” in which you require the defendant to return to court to state under oath what assets he has that you may be able to acquire to pay the judgment the court ordered in your case. You will be looking to see if the defendant has a job, what his income is, if he owns any property, or has money in the bank or elsewhere.

To collect, if you file the proper paperwork with the court you can acquire a wage deduction order (garnishment). If the defendant is self-employed, or if he is of limited income (makes about minimum wage), or is already being garnished for child support, or other debts – you may not be able to get such order.

If the defendant has property (usually a car or a house), you can file a lien, that requires that if the property is ever sold, you will get what is owed you out of the sales proceeds. Sometimes another creditor may have a lien before yours that could keep you from getting paid at the property sale if there’s not enough money left for you after the sale.

If he has money in the bank, you can get an order to have it turned over to you, if the defendant doesn’t withdraw it from the bank first. Some government benefits are exempt from collection through a bank account.

The entire collection process can be difficult, but a court judgment is the first step, and a small claims judgment can be sought with little difficulty without a lawyer. For more information about the collection process see: http://www.illinoislegalaid.org/

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Small Claims Court I

In Illinois, a small claim is a case filed in a courthouse in which the filer claims that someone owes him less than $10,000. Small claims court was created so that the non-lawyer would have a court that is friendly to him and less demanding regarding legal procedures. It’s not like “Judge Roy Bean,” and the old West, though. Small claims are still heard in a courtroom, with a judge at the bench wearing a robe. The judge still demands your respect, but does not hold you to the standard of the knowledge of the law to which he holds a lawyer.
If you sue, or are sued in an Illinois small claims court, you might have an opponent represented by a lawyer. Many small businessmen hire lawyers to collect their debts, and some lawyers specialize in representing numerous small businessmen in one court session at a time. And you, too, can hire a lawyer to represent you in small claims court.
In Williamson County, the Office of the Circuit Clerk has a handout that does a very good job of explaining what a small claim is, and how to commence one. This article is not meant to guide you through the process of a small claim, but instead is meant to give you basic information.
Venue – Is the term meant to designate in which county a small claim can, or must be filed. Generally, if you sue an individual, you must sue in your county, or in the county in which the transaction that gives rise to the claim occurred.
Pleading – Is the complaint you file with the court to state your claim. You can get a copy of the form from your local circuit clerk. It must allege that you, the plaintiff, are owed a specific dollar amount, by a particular person, the defendant. It should list mailing addresses, not post office boxes, for both of you. It should be as specific as you can be in explaining the dates and reasons the money is owed you. The complaint must be signed and notarized when you file it with the court.
Fees – In Williamson County, filing fees are from $54 to $84 dollars, dependent upon the amount of your claim. In order for the court to have jurisdiction over the defendant, you will have to serve him with a summons. The county sheriff’s office will do this for you, for around $50. Then you will have legal proof that the defendant knows he is being sued, and the court can rule against him, if he fails to attend your hearing.

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Backseat Drivers III

We’ve all dealt with them, even those of us who are not married – BACKSEAT DRIVERS! You know, the riders who seem to know more about traffic laws than the drivers. Following are more of the common criticisms that we have all been through, and the actual Illinois law that determines whether the front seat, or back seat driver is right.

BACKSEAT DRIVER — You’d better watch it when you merge onto the interstate, you’re gonna hit someone one of these days.
DRIVER — Quit kiddin’, they have to get out of MY way, I’m merging and I can’t see them behind me. The law says they have to move over!
THE LAW – The driver’s wrong again. When you merge onto an interstate highway, the traffic on the highway has the right of way. The merging traffic has to yield to the traffic already on the interstate.

BACKSEAT DRIVER – Jack, don’t you see those “slow, construction area” signs? You’ve got to slow down.
DRIVER – No I don’t, there’s no construction going on anywhere around, they’ve shut down for the day.
THE LAW – You are subject to construction area speed signs even if there are no workers present. The speed limit is not only to protect the workers, but you too. There can be unexpected hazards in the area, and you can never be sure there are no workers.

BACKSEAT DRIVER – What do you think you’re doing, you can’t pass on the right, when stopped in traffic.
DRIVER – I’m not waiting any longer, there’s plenty of room, I’m gonna pull up there so I don’t have to wait for all this traffic to make my right turn.
THE LAW – Once in a while he’s right. You CAN move out of your lane to make a right hand turn at an intersection, if you do so safely, do not leave the pavement, and if there’s 8 feet in width of unobstructed pavement. (So obviously, motorcycles can’t make such maneuvers, if there’s not enough room for a car to do so.)

BACKSEAT DRIVER – Now what do you think you’re doing? You can’t just pull that old truck to the mechanic using a chain, that’s dangerous.
DRIVER – Don’t worry, Junior will be in the old truck, he can hit the brakes if we get too close, and we’re only going a few miles anyway.
THE LAW – I’m sure you guessed this one already. You can’t have a person in a towed vehicle except in emergencies, when towing less than 15 miles per hour, or in a parade, or for farming-related activities, and the rider is over 18 years of age.

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