CREDIT REPORTING REQUIREMENTS

The Fair Credit Reporting Act (FCRA) requires that when a consumer sends a dispute to a credit bureau it is supposed to forward that dispute to the creditor reporting the inaccurate or incomplete information. The credit bureau must give the creditor all relevant information related to the dispute. The creditor must then review the information and conduct an investigation into whether the report is accurate. If the creditor determines the disputed information is inaccurate it must correct the description of the account (called a "tradeline").

The Consumer Financial Protection Bureau (CFPB), the governmental watchdog over credit reporting, recently issued reminders to creditors about their obligations under the FCRA. The CFPB said it expects creditors to (1) maintain a system capable of receiving information about disputes, (2) conduct investigations using all information forwarded to them by the credit bureaus and their own information, (3) report the results of the investigation back to the credit bureau, (4) provide corrected information to all of the credit bureaus, and (5) modify, delete or permanently block incomplete or inaccurate information that a creditor might have provided to the credit bureaus. The CFPB said it is monitoring complaints from consumers and will bring enforcement actions when necessary. If your credit reports are showing inaccurate information about your debts contact us to talk about what response to take. Pursuing violations of the FCRA requires that specific steps be followed before relief can be sought in court. We can help walk you through what to do and advise whether legal action is warranted.

MODIFYING A CHAPTER 13 PLAN

Clients considering a Chapter 13 bankruptcy are often afraid they'll be stuck in a payment plan they can't afford if something changes during the plan period. As I often tell clients, life doesn't stop just because someone files Chapter 13 bankruptcy so the chances of some unforeseen circumstance disrupting their income are good. Although some clients go the entire 3-5 years without needing a plan modification, more often then not, something will happen that requires a change in the plan payment. Job loss, car repairs, home repairs, medical bills, tax debt. All of these and more might require that a plan be modified to address a borrower's new budget. To modify a plan a motion must be filed with the court explaining why the modification is needed and what the new payment plan is to be. The process for obtaining approval of a modified Chapter 13 plan generally takes at least 45 days so plan modifications can't be done quickly to reflect month-to-month changes in a borrower's budget. But if change in the plan payment is necessary, borrowers can be confident they won't have to continue making a payment they can't afford. If you're in a Chapter 13 plan currently and are anticipating some change that will make you unable to make your plan payment contact us as soon as possible so we can propose the necessary modification.

HEALTH IMPACTS OF TOO MUCH DEBT

Two recent studies document the serious health risks of not dealing with high debt levels. The latest study published in August 2013 from researchers at Northwestern University's School of Medicine looked at the psychological and general health conditions of young adults between the ages of 24 and 32. The study found that adults with high debt (defined as debt exceeding assets) had increases in high blood pressure, higher levels of perceived stress and symptoms of depression. Previous studies had found similar correlations between high debt and psychological health but the researchers were surprised to find that young adults now face physical health problems as a result of higher debt levels.

An earlier study from May 2013 conducted by researchers at the University of Michigan documents the unfortunate consequence of high credit card and medical debt. The researchers found that people are more likely to delay or avoid medical and dental care if they have significant credit card and medical debt. The researchers did not find the same results in households with just mortgages and car loans. The study's author said people with large credit card and medical bills "may be more pressured to repay them to avoid interest and stress, and they may forego medical care to save money under this kind of pressure, even if they really need it."

We have unfortunately seen these problems frequently in our practice. If you're suffering health impacts from too much debt contact us so we can discuss your options.

COSIGNED DEBT IN CHAPTER 13

Co-signing a loan for someone means you're making yourself fully responsible for repayment of the loan. While there may be an agreement between the co-signers as to who is going to make the payments, the lender doesn't need to honor that agreement. They just want to see the loan repaid, regardless of who pays. When a Chapter 13 bankruptcy is filed an "automatic stay" goes into place that prevents lenders from attempting collection. That automatic stay protects a co-signer as well as the debtor if the Chapter 13 plan will result in full payment of the loan. In other words, if someone files Chapter 13 bankruptcy and their plan will result in full repayment of a car loan that's been co-signed by a parent, the lender is prohibited from trying to collect the loan against the parent just as they are prohibited from trying to collect against the child. This is known as the "co-debtor stay" in Chapter 13.



An exception to the co-debtor stay is when the plan fails to propose full repayment of the loan that's been co-signed. In that case, the lender can ask the court to allow them to collect from the co-signer, but only the amount that's not getting repaid through the Chapter 13 plan. A lender may wait until after the bankruptcy is completed to see how much of the co-signed debt still remains before trying to collect from the co-signer. If you have loans or debt that has been co-signed and are considering bankruptcy contact us so we can discuss the impact of the bankruptcy on the co-signer.

MAKING CHAPTER 13 PLAN PAYMENTS

Clients in Chapter 13 bankruptcy can make their Chapter 13 plan payments several ways.  In Iowa the Chapter 13 trustee doesn't accept personal checks and can't do withdrawals from bank accounts but money orders or cashier's checks can be mailed to the trustee each month. The debtors' name and case number should be put on the money order or cashier's check. The best way to make plan payments, however, is through a wage deduction order that the trustee can set up with a debtor's employer. These wage deductions can be structured so that the entire payment is deducted once each month or deductions can occur every pay period and even from each debtor if filing jointly with a spouse. By having a wage deduction order created debtors are more likely to stay current on payments and avoid motions to dismiss from the trustee. The trustee will give debtors a specific plan payment date for each month but it's generally only important to make sure the payment is always made during the month it is due. If  you're interested in learning more about how Chapter 13 works contact us at melissaatthompsonlaw@gmail.com or visit our website at www.thompsonlawoffice.net. 

INDEPENDENT FORECLOSURE REVIEW PAYMENTS

Several clients have begun receiving checks as a result of errors made by mortgage servicers. Unfortunately, the payments don't begin to cover the actual loss suffered by many people who lost their homes to foreclosure or had to put up with multiple mortgage loan modification errors or problems. The checks result from a January 2013 settlement agreement between the nation's top eleven mortgage servicers and federal banking regulators. Nearly four million people are eligible for the payments.

The payments range from $300 to $125,000 depending on the type of servicing error, whether a foreclosure had been completed or not and whether the borrower was an active duty member of the military. Not surprisingly, only about 1100 of the four million  people eligible to receive payments are eligible to receive the largest amount of $125,000. The vast majority of borrowers will receive less than $1000. Payments will be received for a number of different categories, including where a servicer failed to engage with a borrower in a loan modification; where a modification request was denied; where a servicer completed foreclosure on a borrower performing all the requirements of a trial modification; where a servicer initiated foreclosure on someone in bankruptcy; where a mortgage servicer foreclosed on an active duty military member; and where a mortgage servicer failed to convert a borrower from a trial to a permanent modification.  Borrowers who receive and accept these payments waive no rights or defenses they might have against a mortgage servicer. A chart showing the number of borrowers in each category and the payment amount designated for that category can be found on the website of the Office of Comptroller of the Currency.

MORE CHAPTER 11s?

When the 2005 bankruptcy law was adopted by Congress it created a new "means test" that borrowers had to pass if they wanted to qualify for a Chapter 7. Congress limited this requirement only to debtors with primarily consumer debt. In other words, debtors who had incurred most of their debt from a failed business could avoid having to pass the means test in order to file Chapter 7. The provision allowed business debtors to file Chapter 7 even though their budget might have shown substantial income. The 8th Circuit Bankruptcy Appellate Panel (BAP) has ruled though, that a Nebraska bankruptcy court was correct when it approved the forced conversion of a Chapter 7 to Chapter 11 for a debtor who had primarily non-consumer debt but whose budget showed substantial disposable income. The Court said the conversion was acceptable under a different provision of the Code then the provision dealing with exemption from the means test for business debtors. 

The Court's decision raises serious implications for debtors who might need to file bankruptcy because of a failed prior business but who still have high incomes. The decision will hopefully be appealed but unless overturned by a higher court, this decision may lead to more debtors having to use Chapter 11 as a way to eliminate debt from a failed business.