Thursday, November 15, 2018

Problems with Student Loan Forgiveness and For-Profit Colleges

Student loan debt is an enormous problem in the Chicago area and across the country. There are certain loan forgiveness programs that some debtors can rely upon if they meet the necessary requirements. In numerous cases of debtors who were defrauded by for-profit schools, a federal loan forgiveness program was supposed to come to the rescue. However, according to a recent article in The New York Times, that “government program meant to forgive the federal loans of cheated students has all but stopped functioning.” In short, tens of thousands of borrowers seeking relief from deceptive lending tactics under a “borrower defense” program are not getting the relief they were promised.
Claims for Loan Forgiveness are “In Limbo”
The student loan borrowers at the center of the article are those who assert that they “were victims of fraud, left with useless degrees and crushing debt.” Some of those borrowers went to Corinthian Colleges, a name that many consumers now associate with harmful for-profit schools and fraudulent student loan lending tactics. Other students attended institutions that are less well known, but also were for-profit institutions alleged to have defrauded students, such as the Minnesota School of Business or the New England Institute of Art. Most of these for-profit schools have faced lawsuits from state attorneys general alleging fraud and other deceptive practices.
When tens of thousands of similar borrowers sought forgiveness for their student loans, they expected to hear back from the federal government. However, staff members with the U.S. Department of Education have “fought in court to reduce the amount of relief granted to some students and to halt a rule change intended to speed other claims along.” The article underscores that these actions have “left more than 100,000 claims for relief in limbo.”
Learning More About the Borrower Defense Program
These former students are seeking relief through the “borrower defense” program, which permitted borrowers from for-profit institutions to file claims for relief after those schools closed. About 30,000 of these claims were approved under the Obama administration for full forgiveness. Since Betsy DeVos took over at the Department, only about 16,000 claims have been approved, and only about 7% of those approvals have been for full loan forgiveness (the remaining approvals have only provided partial forgiveness).
Consumer advocates have spoken out against the Department’s current handling of borrower defense relief claims. For example, the director of the Project on Predatory Lending at Harvard Law School emphasized that, in order for the program to function, it must be implemented. We will need to wait and see how the Department of Education continues to handle claims, and whether borrowers receive the type of relief they deserve.
Contact an Oak Park Consumer Protection Lawyer
If you are having difficulty repaying loans, or if you have been defrauded, it is important to learn more about options that may be available to you. Under the Fair Debt Collection Practices Act, student loan borrowers are protected from unscrupulous debt collection practices. In some cases, student loan borrowers may even be eligible to file for bankruptcy to seek a discharge of their student loans. A consumer protection attorney in Oak Park can help. Contact the Emerson Law Firm to learn more about the services we provide.
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Tuesday, November 13, 2018

How “Overbiffing” is Harming Debtors

What is “overbiffing,” and how is it harming debtors? According to a recent report from CBS News, “overbiffing” is a term used for a practice in which debt collectors overstate the amount of money that consumers owe. And, as the article underscores, it is “the latest outrage in unfair debt collection.” In effect, through “overbiffing,” a debt collector can trick a consumer into paying more than she or he actually owes.
If you were contacted recently by a debt collector who said you owed more money than you do, or who attempted to collect a debt from you that you do not owe at all, you may have been a target of “overbiffing,” and you may have a claim under the Fair Debt Collection Practices Act (FDCPA). An experienced Oak Park consumer protection attorney can discuss your options with you.
How Does “Overbiffing” Occur?
How exactly does “overbiffing” work? In other words, what are some of the tactics or methods that debt collectors use in overstating the amount of debt that a particular person owes? There are numerous different tactics involved in “overbiffing,” including “fraudulent inflating consumer balances and using profane, abusive, and illegal tactics to collect the fabricated bills.” The term “overbiffing” comes from the use of the acronym BIF to describe a person’s “balance in full.”
It is extremely important for anyone who owes debt in Oak Park to know that they have protections under the Fair Debt Collection Practices Act. Debt collectors can not simply use any tactics to collect debt. They can not engage in any unfair, deceptive, or fraudulent debt collection practices. As the report clarifies, “overbiffing” is prohibited under the FDCPA, yet some debt collectors continue to use deceptive methods to obtain payment from debtors.
How “Overbiffing” Violates the Fair Debt Collection Practices Act
The report discusses a particular debt collection company that is alleged to have conned thousands of debtors into overpaying on debts. Many of those debtors were informed that they owed hundreds or thousands more dollars than what their actual balances showed. Lying to a debtor about the amount of money that she or he owes is just one violation of the FDCPA.
In engaging in “overbiffing,” debt collectors can violate the FDCPA in other ways, as well. To be clear, the FDCPA prohibits all of the following:
  • Debt collector misrepresenting itself as an attorney or a member of law enforcement;
  • Debt collector lying about the amount of debt owed;
  • Debt collector lying about the consequences of failing to repay a debt, such as the possibility of going to jail.
These actions are not just unlawful under the FDCPA. Many states have enacted similar state-specific laws. In Illinois, debtors are protected not only by the federal FDCPA, but also by a similar Illinois state law known as the Collection Agency Act (225 Ill. Comp. Stat. 425/1 through 425/25).
Seeking Help from an Oak Park Consumer Protection Lawyer
If you have been treated unfairly by a debt collector, you may be able to file a claim. A dedicated consumer protection lawyer in Oak Park can evaluate your case and can discuss your options with you. Contact the Emerson Law Firm to learn more about the services we provide to consumers throughout Oak Park and the Chicago area.
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Friday, November 2, 2018

Can I Receive a Bankruptcy Discharge if There is a Judgment Against Me?

If a consumer fails to pay a creditor what she owes that creditor, the creditor likely will begin attempting to collect on the debt. At first, the creditor likely will make contact with the debtor, urging the debtor to pay what she owes. If the debtor does not make payments, after a certain amount of time, the creditor may sell the debt to a third-party debt buyer, or the creditor may file a lawsuit against the debtor. If the creditor does file a lawsuit against the debtor and wins a judgment, can the debtor get rid of the judgment by filing for bankruptcy?
A judgment does not prevent a debtor from filing for personal bankruptcy. However, whether bankruptcy can erase the judgment depends on a number of factors. To answer this question, we want to provide you with more information about how a judgment works, and how a lien can affect your ability to discharge the debt and everything you may owe to the creditor.
When a Creditor Files a Lawsuit and Wins a Judgment
When a debtor is unable to pay her bills, the creditor may file a claim against the debtor. The debtor will be served with court papers, and typically will have the option to settle the case, to go through some type of alternative dispute resolution (ADR) such as mediation or arbitration, or to let the case move forward. If the debtor does not respond and does not go to court, the court can enter a default judgment against the debtor. Even if the debtor shows up to court, it is possible that the court will find in favor of the creditor and enter a judgment against the debtor.
When the court enters a judgment against a debtor, that debtor might consider personal bankruptcy. However, it is important for the debtor to know that, if she fails to pay on the judgment, Illinois law makes clear that the judgment can become a lien on any real estate that the debtor may own. The lien can allow the creditor to force the debtor to sell the property in order to pay off the judgment, but the creditor will not necessarily do this. Under Illinois law, a lien of this type remains on the property for seven years, and the law allows a creditor to renew the lien up to two times (for a total of 21 years in some cases).
What does a lien have to do with filing for Chapter 7 bankruptcy? In short, if a debtor has a judgment against her and a lien on real estate, filing for bankruptcy and getting a discharge will not completely wipe away the debtor’s connection to the creditor.
How Judgments and Liens are Handled in a Consumer Bankruptcy Case
How do bankruptcy courts handle judgments and liens in a personal bankruptcy? First, if you have a judgment against you, it is possible to have it discharged in your bankruptcy case as long as the debt is dischargeable. There are some types of debt that are not dischargeable. If the debt from the judgment is a non-dischargeable type, you can not get rid of the judgment through bankruptcy. However, if the debt is dischargeable, it is likely that you can discharge the liability you owe from the judgment.
If there is a lien on your property connected to the judgment, you can not simply get rid of the lien by filing for bankruptcy. Instead, you will need to file a lien avoidance action, and you will need to be able to show that some of the real property tied to the judgment lien is exempt according to the bankruptcy exemptions. If you do not file a lien avoidance action, the lien will still be attached to your property even after you receive a bankruptcy discharge.
Learn More from an Oak Park Bankruptcy Attorney
Judgments and liens in bankruptcy can be extremely complicated, but an experienced Oak Park bankruptcy lawyer can help. Contact the Emerson Law Firm today to learn more about how we can assist with your bankruptcy case.
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Wednesday, October 31, 2018

Seventh Circuit Elaborates on Definition of “Consumer” Under Fair Debt Collection Practices Act

The Seventh Circuit Court of Appeals recently heard a case in which it had to determine whether the definition of a “consumer” under the Fair Debt Collection Practices Act (FDCPA) includes a person who is being contacted by a debt collector over a debt that allegedly is owed, but which the person claims she or he does not owe. The definition of “consumer” is extremely important for this particular type of situation because it determines whether that person—who says she does not actually owe a debt but is being contacted about a debt—has protections under the FDCPA.
In the case, Loja v. Main Street Acquisition Corp. (2018), the Court determined that the definition of “consumer” under the FDCPA is broad enough to include “consumers who have been alleged by debt collectors to owe debts that the consumers themselves contend they do not owe.” The case will have implications for future consumers in Oak Park and throughout Illinois. We want to tell you more about the case and why it is significant.
Getting the Facts of Loja v. Main Street Acquisition Corp.
The case began back in 2007 when a person opened a Visa credit card account using the name “Mario Loja.” The card went into default with a remaining balance of $4,018.17, and the bank charged off that debt. The bank then sold the debt to Main Street Acquisition Corporation, which is a collection agency in Illinois. The collection agency then hired a lawyer to file a claim to recoup the money owed. In short, Mario Loja was named in the complaint, and he was served with papers requiring him to appear in small claims court.
According to the case, Loja “maintains he never opened an account . . . and never accrued any credit card debt” on that account. When Loja was served with the complaint, he appeared in small claims court to insist further that he never owed the debt. He also insisted that, even if he did owe the debt, the claim was time-barred under Illinois law. The small claims court dismissed the case with prejudice, ruling in favor of Loja.
Loja then filed a claim against Main Street under the FDCPA. Main Street argued that Loja was not eligible to file a claim under the FDCPA because he was not able to show that his claim related to credit card debt “for personal, family, or household purchases.” Loja argued that, even though he did not owe the debt in question, it was “on a personal credit card,” which was sufficient for purposes of filing a claim under the FDCPA. However, the district court dismissed the case brought by Loja for another reason, which led to the Seventh Circuit hearing the case.
Defining a “Consumer” Under the FDCPA
The district court ultimately dismissed the case in favor of Main Street, ruling that Loja was ineligible to file a claim because he did not meet the definition of a “consumer” under the FDCPA. The district court reasoned that a consumer is defined as one who is “obligated or allegedly obligated to pay any debt,” and as such a plaintiff—Loja in this case—would be required to “allege he actually owed a debt.” Since Loja maintained that he did not owe the debt, the district court said he could not file a claim under the FDCPA. Loja appealed to the Seventh Circuit.
The Seventh Circuit Court of Appeals ruled that “the definition of ‘consumer’ under the FDCPA includes consumers who have been alleged by debt collectors to owe debts that the consumers themselves contend they do not owe.” The Court reasoned that this ruling is in line with the aims of the FDCPA, which is designed to hold debt collectors accountable for their conduct. The ruling broadens the definition of consumer and allows other people in situations like Loja’s to file a claim under the FDCPA.
Contact an Oak Park Consumer Protection Lawyer
If you have questions about your rights under the FDCPA, you should discuss your case with a consumer protection attorney in Oak Park. An advocate at the Emerson Law Firm can help. Contact us today for more information.
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Friday, October 26, 2018

Personal Bankruptcy, Parent Loans, and the Student Debt Crisis

When we think about the student loan debt crisis and consider the ways in which personal bankruptcy may or may not be an option for discharging student loan debt, most of us think about the students who used those loans to attend a program at a college or university. However, as a recent article from 401kTV points out, parents of college students are also frequently left with student loan debt (from their children), and those parents also want to learn more about bankruptcy options for managing debt.
How do parents end up bearing the brunt of student loan debt in certain situations, and do they have the option of filing for consumer bankruptcy to discharge loan debt?
How Student Loan Debt Affects Families (and Not Just the Student)
The effects of student loan debt extend well beyond the individual who used those student loans to pay for school. Many parents find themselves in situations in which they have taken out student loans to help their kids pay for school. Why do parents take out student loans for their children? In other words, why are these costs being placed upon parents when their kids (the students) could be borrowing the money they need to pay for college? An article in U.S. News & World Report explains that college costs—including student loans—often fall to parents “after students hit the federal borrowing limit.” Indeed, as of 2017, approximately 14% of college students relied on parent loans to pay for school.
Most parents who take out student loans for their children borrow Parent PLUS loans, and the average borrowed is just over $10,000. However, there are a number of parents who borrow private student loans, which tend to be for larger amounts. In some cases, parents also use other options to help their children pay for college, such as taking out home equity loans or using money from their retirement accounts.
For some parents, taking out student loans to help their children pay for college can result in more debt than they can handle, and some seek bankruptcy protection. According to the article in 401kTV, student loan debt from children could be one of the reasons that we have seen a rise in bankruptcy rates among older adults.
More Older Americans Filing for Bankruptcy: Is Student Loan Debt Partially to Blame?
The article discusses recent research surrounding bankruptcy filings among older Americans, particularly for recent retirees. It suggests that the student loan debt crisis could be the reason that some of these recent retirees are filing for Chapter 7 bankruptcy—in an attempt to discharge student loan debt that they borrowed for their children. If this is the case, the article intimates, we could see a continually rising rate of bankruptcy among older adults as long as the student loan debt crisis continues.
Since 1991, the rate of bankruptcy among adults aged 65 and older has tripled. While there are numerous reasons that researchers have cited for the rising rate of bankruptcy in the Baby Boomer generation, it may be important to start thinking more closely about the role that parents’ student loan debt (borrowed for their kids) could be playing in decisions to file for bankruptcy.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about student loan debt and bankruptcy? Do you have concerns about filing for bankruptcy after retirement? An experienced Oak Park bankruptcy attorney can answer your questions. Contact the Emerson Law Firm for more information.
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Friday, October 19, 2018

Private Debt Collection and Student Loans

Earlier this year, we discussed plans within the U.S. Department of Education (DOE) to hire private debt collection firms in order to track down delinquent student loan debtors. However, according to a recent article in U.S. News & World Report, the DOE “may sever ties with private debt collection firms.” What does this mean for student loan borrowers, and will it have any impact on debt collection practices?
Potentially Good News for Federal Student Loan Borrowers
The news that the DOE may cut ties with third-party debt collection companies could be good news for federal student loan borrowers who are currently in default. According to the article, consumer advocates have emphasized that debt collection tactics for past-due federal student loans have been problematic in many ways. In perhaps the least harm—albeit harmful nonetheless—debt collection methods, collectors have not given borrowers clear information about alternatives that could be available to help them repay their debts. More problematically, some of the third-party collectors hired by the DOE, including Performant Recovery and Windham Professionals, “have been accused of predatory practices,” according to the article.
While the DOE says the plan to end its relationship with private debt collectors is part of a larger scale process designed to modernize the student loan debt system in general, some consumer advocates have concerns about the Trump administration’s ultimate treatment of student loan borrowers, and particularly those who are having difficult making payments.
What has the DOE done recently for borrowers? The article points out that it has begun increasing outreach efforts to “at-risk borrowers,” meaning those who are 90 days behind on student loans. Previously, the DOE would not begin reaching out to borrowers until they were 270 days or more in default. In addition, the DOE has put forward a plan: Next Generation Financial Services Environment, or NextGen for short. It is designed to “provide a more uniform service for repayment” and to simplify the student loan repayment process.
Knowing Your Rights as a Consumer and Managing Student Loan Debt
Many people with student loan debt know that private student loan lenders, and debt collection methods connected to those loans, can sometimes engage in harmful debt collection practices. It is important to know that anyone who has taken out student loans—whether private or federal—has protections under the Fair Debt Collection Practices Act (FDCPA). Collectors who are working on behalf of the U.S. Department of Education must abide by the FDCPA just like any other debt collector.
In addition to protections under the FDCPA for fraudulent or deceptive debt collection practices, consumers should also know that it is not impossible to discharge student loans in bankruptcy. While it can be difficult to discharge student loans—and more difficult to discharge these loans than many other types of debt—numerous debtors are in fact able to show that continuing to make student loan payments would be a hardship, and they are able to have that debt discharged in Chapter 7 bankruptcy.
Speak with a Consumer Protection Lawyer in Oak Park About Your Student Loans
If you have concerns about deceptive student loan debt collection practices, or if you have questions about discharging student loans in bankruptcy, you should speak with an experienced Oak Park consumer protection lawyer. An advocate at the Emerson Law Firm can discuss your options with you today. Contact us for more information.
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