Danger in the Mail

Danger in the Mail

You face a danger every day
Of which you may not be aware
It comes benignly in the mail
But I’m telling you, beware
 
It’s not a toxic powder
A bomb, or poisonous glue
It’s a simple offering
Of easy money, just for you
 
It may be a simple credit card,
A check to deposit, if you please
But no matter what’s its form
It’s works just like a disease
 
It sits there on your dresser
Daring you to resist
The use of all that money
But you must desist
 
The bankers put them in the mail
Applications by the billions
Hoping to lure you into their snare
So they can make their millions.

For it's easy to borrow money
But so very hard to pay it back
And if you let your guard down
You won't survive the next attack
 
copyright 2012
William Manchee

The Speech I Never Gave

A Must Read For Young Adults

A young man came up to me at a book signing a year or two ago and asked me if I was the man who wrote Plastic Gods. I acknowledged to him that I indeed was that man. He smiled and then proceeded to tell me what a great book it was and how much he'd enjoyed it.

My signing had been a little slow, so his kind words lifted my spirits. It was gratifying to find out my book had meant so much to this young man. As I stood waiting for the next person to stroll by I thought about my own youth, decades earlier. Graduating second in my high school class at Buena High School in Ventura, California, I was asked to address my fellow graduates. Being barely 17 at the time and having lived a sheltered life, I wasn't a fountain of wisdom at the time, so I didn't really know what to say. Somehow I stumbled through my speech but it had been mediocre at best. If only I'd of known then what I knew now. I started to formulate in my mind what I would have said to my fellow classmates had that been the case.

Fellow seniors, I stand before you today to warn you of a great peril that you will face the moment you step out into the world on your own. It's a danger that will threaten your health, your happiness, your marriage and even your very freedom. The reason this risk is so dangerous is that it is perfectly legal. There are no laws to protect you, no warnings from family and friends, and you won't know that you are a victim until its too late.

What I'm warning you about today is the credit trap--the lure to buy now and pay later, to live above your means, to accumulate possessions of every sort that you don't need. It's an unfortunate fact of life that our economy is driven by credit and you will be expected to do your patriotic duty and help drive the economy forward. This pressure will be manifested by a deluge of credit card applications, offers of financing for new fancy cars, a barrage of advertising trying to lure you into buying expensive home, clothes, cosmetics, travel packages, you name it.

You won't feel any pain the first few years after you fall into the credit trap. You'll be enjoying everything you've purchased on credit. Minimum payments on credit cards are low and you can draw on your credit cards or credit line if you come up short. It won't be long though until you'll find yourself in serious trouble. Lets say you have $50,000 of family income. If you did a budget you'd discover that you were probably spending $70,000 or more. That means you're going in debt at the rate of $20,000 per year plus interest.

Interest at first may be reasonable, but the first time you miss a payment it will be jacked up to 28% and every time you go over your limit or make a payment late you'll be charged outrageous fees in addition to the high interest rate. Soon, in addition to your car and house payment you'll have credit card debt exceeding your car and house payment combined. You'll live with this as long as you can, borrowing from Peter to pay Paul, but eventually it will be too much and the only way out will be bankruptcy.

It's an established fact that financial stress is the leading cause of divorce. After a few years when creditors start to call, your credit goes in the dumpster, and it gets difficult to even pay basic bills. You'll start blaming your spouse, arguments will ensue, and love will turn to bare tolerance. It's very common for bankruptcy to be followed by divorce. Some law firms offer a combination package, bankruptcy and divorce all for one low fee.

So, you've been warned. Don't fall into the credit trap. If you do, at best you'll lose your financial freedom and at worst you'll end up alone in the bankruptcy courts. Don't live above your means. The only credit you'll ever need is for a house, a car and perhaps your children's education. Pay cash for everything else.

Now here's my final piece of advice. If you follow it you'll never experience the tragedy I've just described. When you get your first job and go out on your own, prepare a budget and follow it no matter what. Change it whenever your income changes, and put in a budget item for savings. Ten percent is the amount you should save each month. Do this without fail and you'll preserve your financial freedom, greatly improve the chances of having a successful marriage and go a long way in insuring your future happiness and well being.

That's the message I wish I'd of given my fellow students back in 1969. I know I would have benefited from it. You see, I fell into the credit trap just like millions of other American's have done over the years and suffered greatly on account of it. It's only been in the past few years that I've managed to escape and become debt free.

I wrote Plastic Gods as a way to communicate this message to readers in a way that would be entertaining but still effective. The young man I met tonight wasn't the first person who's thanked me for Plastic Gods, but it felt good to know yet another person had benefited from reading it.

 

Get Plastic Gods now at Amazon.com or download the audio version at Audible.

 

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Creditors Sometimes Assign Discharged Debt to Collection Agencies

Recently I worked on a petition against a Colorado collection agency that called our client six times afrer receiving the account from the orignal creditor who was listed in their chapter 13 bankruptcy.  This is a blatant violation of the automatic stay and/or discharge injjunction. In this instance the case was later converted to chapter 7 so it was a discharge violation. Then, to make matters worse, the collection agency assigns the case to an attorney for collection, yet another violation.

 

How does something like this happen? Is it intentional or simply negligence? The excuse we almost always get from collection agencies is that they had no knowledge of the bankruptcy because the creditor who sold or assigned the account didn't tell them about it. Unfortunately for the collection agencies, ignorance of the bankruptcy is no excuse. When they try to collect a debt that is no longer collectable they violate the Texas Unfair Debt Collection Act and if they report it to a credit bureau they can be guilty of liable as well.. It is irrelevant whether they knew about the bankruptcy or not.

 

What is fairly clear is that when the original creditor gets the conversion and discharge notices it will not pass on those notices to the current holder of the debt. I think this is a matter of logistics. The original creditors simply have too many accounts that have been assigned for collection or sold and have no mechanism in place to forward notices from the bankruptcy court.

 

So, the consumer loses and has to suffer through the mental anguish that always results from taking nasty phone calls and/or receiving collection letters from attorneys long after the debt is discharged.  Lucky there is a remedy to the consumer.

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Millions of Americans Will Seek A Fresh Start, But Will They Get It?

With lingering unemployment and the inevitable casualties of our credit driven economy, millions of Americans will be forced into bankruptcy over the next few years. They will be looking for a discharge of their credit card debts, medical bills, and mortgage deficiencies and the fresh start the bankruptcy code promises.

 

Unfortunately, even if they successfully complete their bankruptcy filing and their debts have been discharged doesn't mean the fight against predatory lenders is over. Many creditors intentionally misreport people's credit after filing bankruptcy and some will even continue trying to collect the discharged debt. You would think there would be someone in the government making sure creditors obeyed the bankruptcy discharge and the Fair Credit Reporting Act, but that's not generally the case. That task is largely left to the debtors themselves, which means most often nothing is done and the predatory creditor is allowed to continue to ruin the lives of innocent Americans.

 

We have all witnessed lender greed and corporate excess during the current economic meltdown and it's time we put an end to them. Fortunately there are a myriad of laws available to stop this type of abuse by the credit industry. The first is a contempt action in the bankruptcy court, the second are federal actions under Fair Credit Reporting Act (FCRA) and/or the Fair Debt Collection Practices Act (FDCPA), and the third are state court actions for defamation, unreasonable collection or violation of local fair collection laws.

 

Unfortunately, these laws are not utilized often enough to stop this type of abuse. Two of the reasons for this are ignorance on the part of consumers and residual guilt from the bankruptcy filing. They don't know what their rights are after bankruptcy and because they feel a little guilty over not paying their debts, they are not inclined to take action against the lender whose debt has just been discharged. What they don't know is that their creditors haven't necessarily given up getting paid and sometimes won't quit until forced to do so.

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Debtors May Have to Go To Court to Enforce Their Discharge

One of the important benefits of filing bankruptcy is the automatic stay that immediately stops creditors from trying to collect debts included in the bankruptcy. This is a court order that prohibits creditors from calling the debtor, sending out statements or demand letters, filing suit or taking any other action to collect the debt that was owed on the date of filing.

After the case has been administered the automatic stay is replaced by the discharge injunction which is another court order that prohibits creditors from trying to collect the discharged debt. This means once a debt is discharged creditors supposedly cannot take any action to try to collect that debt.

Despite these injunctions, creditors may still try to collect the debt in violation of the court's order. If that happens, a debtor may have a private cause of action in the bankruptcy court against the offending creditor. But the bankruptcy court will not enforce the stay or discharge unless the debtor asks it to by way of an adversary proceeding. So, to protect their rights a debtor should hire legal counsel as soon as they discover there has been a violation.

In the meantime, all statements, collection letters,  credit reports, or emails should be saved and telephone calls documented to be used as evidence later on. Unfortunately, many bankruptcy attorneys don't handle anything but the bankruptcy filing itself. That is why we do that type of work almost exclusively. We want to make sure every bankruptcy filer gets the fresh start they were promised.

 

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Why Don't Lenders Foreclose Quickly After Bankruptcy?

One of the great mysteries of the mortgage industry is why lenders take so long to foreclose when a debt is discharged in bankruptcy. You would think the moment the automatic stay was lifted the lender would want to dispose of its collateral as quickly as possible and move on, but the reality is that lenders often take months if not years to follow through with a foreclosure.

Bankruptcy attorneys speculate a lot about the cause of such delays and some of the most popular theories are (1) inability to deliver good title due to title problems caused by the frequent buying and selling mortgage loans, (2) investors not wanting to take a loss when the market value of the collateral is less than the balance on the loan, (3) there are more delinquent loans than the lenders and servers can effectively handle, (4) they hope that the mortgagor can be induced to cure the default and reaffirm the obligation, and/or (5) they are somehow profiting by not foreclosing.

I have ran into several situations where the lender could not prove they owned a loan. In fact our firm is involved in a case like that right now, but even after a two year battle in district court to validate the lender’s title to the loan, a year has gone by and still no foreclosure. The idea that a bad real estate market made lenders reluctant to foreclose seems logical on its face, but now that the real estate market has turned around in Texas I still don’t see lenders speeding up their foreclosures. It is true that the number of delinquent home loans are at record levels and that the lenders and servicers are just overwhelmed. This seems like a reasonable explanation except that in the three years since the real estate market cratered, you would think the major lenders and servicers would have got their act together and start moving their foreclosures along faster, but I haven’t seen that happening. That leaves us with the final two possibilities which I believe explain what is happening.

First, lenders and servicers are delaying foreclosure to give them more time to lure or trick their customers in bankruptcy into paying the discharged debt. And, secondly, the servicers are delaying because they are somehow making money by holding onto the property. But, whatever the reason, these delays in foreclosing are causing grievous injury to debtors whose debts have been discharged and sorely want to get the fresh start they were promised, but can’t do it with the liability exposure of a vacant house still in their name hanging over their heads.
 
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Mortgage Lenders and Servicers Out of Control?

Mortgage Contracts Allow Creditors to Monitor Credit

Today I reviewed a husband and wife’s credit reports and was shocked to see what their mortgage servicer was doing to them. Over five years ago disaster struck this middle-aged couple, an illness and loss of employment forced them to file bankruptcy. They couldn’t afford their house payments so they surrendered their home in the bankruptcy, moved out, the debt was discharged, so they waited patiently for the lender to foreclose. The property was soon posted for foreclosure but for some unknown reason the foreclosure didn’t go through and hasn’t to this day.

     

Once the debt was discharged the lender no longer had a right to monitor or review the consumer's credit reports since there was no longer a debtor-creditor relationship. About a year later the mortgage servicer contacted the couple several times trying to get them to apply for a modification, do a short sale or give them a deed in lieu of foreclosure. The couple cooperated at first but when a short sale was offered to them it was rejected. The lender knew the couple was not qualified for a modification since they had vacated the property and the debt had been discharged. After the rejection the couple notified the lender in writing that they were fed up and would no longer participate in a short sale or deed in lieu of foreclosure and told them not to contact them in any manner in the future. The letter worked for a couple years and then suddenly the letters, statements, and phone calls began again.

  

When the couple came to us to see what could be done to stop the harassment we pulled their credit reports and were aghast to find out that in 2012 and 2013 the mortgage servicer had pulled their credit reports over 39 times without their consent and without a permissible purpose! It’s hard to believe that some of our leading financial institutions would be a party to such blatant invasions of privacy, but we see it far too often, not only with this servicer but with many others as well. Since the debt had been discharged and was uncollectible, the only conclusions we can draw are that the mortgage servicer doesn’t have the ability to control its automatic collection programs, it has no respect for their customer’s right to privacy, or both. Fortunately, there is a remedy for this flagrant violation of the law, the Fair Credit Reporting Act (FCRA).

 

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Fair Credit Reporting Act Protects Creditors As Much As Consumers

Although you would think the Fair Credit Reporting Act was written to protect consumers, it also has provisions that protect creditors. One specific requirement that insulates creditors, at least under federal law, from liability exposure, is the requirement that consumers dispute erroneous items on their credit reports and give the offending creditor 30 days to confirm or correct the reporting. This may seem fair at first glance, but what if the erroneous reporting was intentional or resulted from gross negligence, which is often the case. Why should creditors be insulated from liability when they cause a consumer to lose an opportunity to buy a house or a car? Why should consumers have to endure the humiliation of a credit denial without recourse when a creditor makes an obvious mistake? Why should creditors get a free pass when they injure a consumer? It doesn’t make sense. There is no doubt the credit industry lobbied long and hard for this provision in the FCRA. Luckily there are state laws that don’t recognize this requirement to dispute erroneous credit before action can be taken against the offending creditor.
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Reporting to the Credit Bureaus Is Debt Collection Activity

The courts have held that credit reporting is debt collection activity and this makes sense as the credit bureaus were established for one simply reason, creditors wanted to make sure that the money then lent would be repaid. The credit bureaus have two functions. First to make sure the money their members lend goes to people who are likely to pay it back. Secondly, if the debt isn’t repaid there is an effective way to force the debtor to pay it back. Since having good credit is critical today for home ownership, to rent an apartment, to get a car or finance large consumer items, most people will do just about anything to keep their credit clean. The reality is depriving someone of good credit is a more effective collection technique that dunning letters, harassing phone calls, or even threat of litigation. This is particularly true in Texas where the generous exempt property laws make collecting from the average citizen a hopeless endeavor. So, when creditor report on their customers after they file bankruptcy they must comply with the Fair Credit Reporting Act and it is imperative for consumers who file bankruptcy to make sure their creditors follow the dictates of the FCRA so their credit will come back as quickly as possible

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Don't Let Finances Destroy Your Marriage.

One of the most common refrains I hear from my bankruptcy clients is: "Why did I wait so long to file?" The problem is most people are optimistic and believe they will be able to turn things around. They hate to admit failure and don’t want to be saddled with the stigma of bankruptcy. So, they suffer unbearable stress and pain, year after year, struggling to make ends meet until their situation becomes unbearable. Few marriages can survive this trauma and as a result families are split apart.

 

The fact is, in our credit driven economy, bankruptcy is inevitable for a lot of consumers. A lost job, illness, business failure, or weakness for all the alluring products and services that are dangled out in front of us each day, can leave a consumer deeply in debt with no way out. In this situation, absent a rich uncle or a lottery win, these consumers will eventually have to face bankruptcy. I’m not saying consumers should take filing bankruptcy lightly, but if there is no realistic way to avoid it then sooner is better than later.

 

This was brought home to me early on in my career when I got a call from a widow of a man who had committed suicide because of his business failure. We put the business in chapter 11 and the man's brother turned it around in six months. The man had taken his life needlessly. So, it's always better to face the inevitable and file bankruptcy before the marriage is destroyed and family relationships irrevocably injured.

 

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Proving Mental Anguish Damages

If a bankruptcy filer prevails in a claim under the Fair Credit Reporting Act or in an adversary proceeding for a violation of the automatic stay or discharge injunction the most likely damages sought will be for mental anguish. After all a debtor expects to get a fresh start from their bankruptcy and when creditors continue to harass them after they have been granted a discharge, it is quite traumatic. So, it is important for bankruptcy filers, who are victims of abusive creditors, to keep a diary of the mental anguish they suffer on account of the unlawful actions of these creditors. This will allow the victim to testify in deposition or at trial fully and completely as to the suffering they have endured. And simply being upset or angry won’t cut it. To prove serious mental anguish damages a plaintiff must show physical symptoms like headache, insomnia, depression, nervousness, marital strife, or lack of concentration that effects their job or enjoyment of life. It isn’t necessary to have expert medical testimony to prove mental anguish but to convince a judge or jury that they have suffered serious mental anguish will require convincing testimony, so the more details, including dates, times and circumstances that can be provided the better.
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Mortgage Companies May Take Months or Years to Foreclose after Bbankruptcy.

When you surrender your home in bankruptcy the debt may be discharged but until the property is foreclosed you may still be liable for homeowners dues, home upkeep and property taxes. So, it is important to closely monitor your mortgage company because they can do serious damage to your credit while they are getting around to foreclosing. Often they will misreport your loan to the credit bureaus and illegally access your credit reports.  They will also continue to send you statements and notices until you tell them to stop. Luckily there are state and federal laws to protect you but you must go to court to enforce them.

 

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What Does It Cost To Protect Your Fresh Start?

Manchee & Manchee PC never charges its clients for its post bankruptcy compliance services. We believe bankruptcy filers shouldn't have to pay to get the fresh start guaranteed to them by the Bankruptcy Code. We make the creditors who are disobeying the law pay our attorney's fees. Even if we file a lawsuit and lose, we don't even make you pay our out of pocket costs.

Our first objective is to get the harassment stopped or the credit report corrected so you get the peace of mind and good credit you deserve. Next, of course, we would like to get paid. Finally, we always try to get a little money in your pocket for your trouble.
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What Should You Do If Creditors Continue Harassing You After Filing Bankruptcy

You would think if someone violated the bankruptcy court's discharge injunction or automatic stay that the court or the trustee would do something about it, but that's not how it works. The debtor must file a contempt motion or adversary proceeding to enforce the court's injunctions. Unfortunately, such actions can cost thousands of dollars and few consumers can afford it. It's unfair so that's why Manchee and Manchee, P.C. often take on these types of cases on a contingent fee basis. 

    If you are the victim of post-bankruptcy harassment be sure and keep any letters or email you receive, note the date and time of each phone call, their telephone number, the caller's name, the company he works for and find out which debt they are trying to collect. Get written verification if you can. 

    Once you have this information call your attorney, or, if you live in Texas, call us. For more information go to our website:  Manchee & Manchee PC