Friday, August 18, 2017

Can a Bankruptcy Trustee Ask for My Online Account Passwords?

If you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy in Oak Park, can the bankruptcy trustee ask for your Amazon Prime or PayPal passwords? According to a recent article in Bloomberg BNA, there was a recent bankruptcy case in which trustees asked for a debtor’s log-in information and passwords for a number of different accounts, including PayPal, Amazon Prime, and eBay. While this incident did not occur in the Chicago area, it is an important issue to consider given that the U.S. Department of Justice indicated that it “doesn’t support the move” of trustees seeking this kind of information.
As of now, however, there is a difference between whether something is legal and whether the Justice Department supports it. Is it legal for bankruptcy trustees to make this kind of a demand in a consumer bankruptcy case?
Bankruptcy Form Demands Log-in and Password Information for Debtors
To better understand whether debtors can be required to provide log-in and password information, it is important to understand how and why the bankruptcy trustees might want it. How did the bankruptcy trustees make this request, and for what purpose? The article indicates that the request came through a bankruptcy questionnaire form that the trustees required a debtor to fill out. The bankruptcy form “demands log-in and password information for the three online services and states that debtors will keep the accounts active and won’t change passwords for at least 10 days.”
The form does not indicate why the bankruptcy trustees want this information, and it also does not clarify who will have access to the log-in and password information contained in the form (if the debtor were to comply with the demand). The article also indicates that it is not clear whether other debtors have provided this information to bankruptcy trustees, or how many other debtors have received such a demand.
Consumer Advocates Argue Bankruptcy Trustees’ Request is Invasive and Intimidating
In general, consumer advocates have responded in opposition to the bankruptcy trustees’ demand for account information. One advocate described the practice as “invasive and intimidating.” According to Ed Boltz, the former president of the National Association of Consumer Bankruptcy Attorneys (NACBA), “the document request is ridiculous.” He echoed that the demand from the trustees is “very, very invasive and a bit frightening.”
It is not common practice for bankruptcy trustees to make “blanket requests” for a debtor’s user ID and password information, particularly when the trustee has not offered a reason for such a demand. The problem in the recent situation is not necessarily that a bankruptcy trustee might request this information from a specific debtor—in a given case, there may in fact be questions about assets, transfers, and account information. The real issue, the article underscores, is that bankruptcy trustees could be demanding account information “as a matter of course, for all their debtors, and without any specific basis.”
There are now “best practices guidelines” for bankruptcy trustees, developed by the Office of the U.S. Trustee and the NACBA. Those guidelines are designed to let trustees know that they should “ask for what they need,” yet they should “keep from having to ask everyone for everything, leading to over-burdensome and often inapplicable document requests.”
Seek Advice from an Oak Park Bankruptcy Attorney
If you have questions about your rights as a debtor when you file for bankruptcy, an experienced Oak Park bankruptcy lawyer can speak with you today. Contact the Emerson Law Firm to learn more about how we can help with your case.
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Friday, August 11, 2017

New Bankruptcy Rules Taking Effect on December 1, 2017

There are a series of new bankruptcy rules that will take effect on December 1, 2017, and they will have an impact on consumer bankruptcy proceedings. Generally speaking, most of these new rules will have the greatest impact on financial institutions, but it is important for individual debtors who are thinking about filing for bankruptcy to understand how the new rules will work and how they will change aspects of personal bankruptcy.
First, we will say a few words about how these changes came about. Then we will discuss some of the changes and will explain what consumers in Oak Park should know about bankruptcy proceedings once the rules take effect on December 1. In the meantime, if you have questions about filing for consumer bankruptcy in the Chicago area, you should speak with an experienced bankruptcy lawyer.
Supreme Court Submits Amendments to the Federal Rules of Bankruptcy Procedure
Official changes to bankruptcy rules began when Chief Justice John Roberts, acting for the U.S. Supreme Court, submitted amendments to the Federal Rules of Bankruptcy Procedure to Congress back in April 2017. The Supreme Court adopted a number of different amendments, including amendments related to Chapter 13 filings, as well as proof of claim requirements and timelines. There is also a new Rule 3015.1
What are some of the amendments? The following provides debtors with information about specific amendments and changes to federal bankruptcy rules:
  • Paying the bankruptcy filing fee in installments: Under Amended Rule 1006, debtors have been able to file for bankruptcy protection with an application to pay the filing fee in installments if that debtor is unable to pay in any other way. The rule has been amended to make clear that “a voluntary petition by an individual shall be accepted for filing, regardless of whether any portion of the filing fee is paid, if accompanied by the debtor’s signed application . . .” This amendment should help to ensure that debtors are able to file for consumer bankruptcy with plans to pay the filing fee on an installment basis, even if they cannot make payment up front.
  • Requirements for filing a proof of claim: Under Amended Rule 3002, secured creditors, unsecured creditors, and equity security holders are required to file a proof of claim in order for that claim to be allowed. In addition, in voluntary Chapter 7 and Chapter 13 cases, a proof of claim must be filed no later than 70 days after the individual files for bankruptcy. These amendments are good for debtors because they clarify the timetable for when creditors must file a proof of claim.
  • Requirements for a Model Chapter 13 plan: Under Amended Rule 3015 and Rule 3015.1, a district can require that a debtor use a Local Form for a Chapter 13 plan if a number of specific conditions (regarding the Local Form) are satisfied. This is complicated but important, and you should always work with an Oak Park bankruptcy attorney before completing a Chapter 13 bankruptcy plan.
Contact an Oak Park Bankruptcy Attorney
The amendments and rule changes we mentioned above are just a few of those that will take effect on December 1, 2017. If you have questions about how the rule changes could impact your bankruptcy case, you should speak with a bankruptcy attorney in Oak Park as soon as possible. Contact the Emerson Law Firm for more information.
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Wednesday, August 9, 2017

College Tuition and Debt Collection Practices

When we think about unfair debt collection practices, most of us think of scenarios in which creditors assess exorbitant fees for late payments, or situations involving fraudulent debt collection measures. When we imagine the creditor in these scenarios, few Chicago residents think about nonprofit colleges and universities. However, the harmful actions of various for-profit colleges, which have led to massive student debt, have made national news over the last several years. As such, it should not come as too much of a surprise that nonprofit colleges also may be engaging in debt collection practices that involve the assessment of “whopping collection fees for unpaid tuition,” according to a recent article in the Chicago Tribune.
What else do you need to know about the debt collection practices of colleges and universities when it comes to unpaid student tuition?
Student Debt Collection: A Case Study
The article discusses one student’s recent debt collection issue at a regional, public, nonprofit university. The student enrolled at the university and paid her tuition and fees for the first semester. The following semester, the tuition and fees rose, and the student continued to make payments. At the end of the semester—by the time classes had ended—the student still owed $3,000 for tuition and fees. She continued working and attempting to pay down the balance. However, when she tried to make her last payment, “she was shocked to learn that her account had been sent to a collection agency that tacked on a fee of 30 percent.” Unless the student pays the remaining tuition and fees balance, on top of the 30% fee, she cannot attend the university or classes this fall.
Part of the reason that the bill at this university was sent to collections has to do with a state statute concerning public universities and debt collection. The university is located in Virginia, but the lessons from this case should still be of interest to Illinois residents, either for those who have kids attending colleges or universities in Virginia or for those who know that debt collection practices do not always remain state-specific. In this case, Virginia has a statute that says public colleges and universities must refer unpaid tuition and fees that are more than 60 days late to debt collectors. The law allows those debt collection companies to charge a fee of up to 30 percent. Yet Virginia colleges and universities are not the only entities relying on debt collectors.
Collection Fees for Current Students at Colleges and Universities Across the Country
Colleges and universities across the country have begun referring unpaid student tuition and fees to debt collection agencies. As the article clarifies, “colleges typically incur no expense in employing private collectors because companies take their cut through fees.” As such, there is not always a reason for colleges and universities not to send an unpaid bill to a debt collector.
According to Anne Gross, the National Association of College and University Business Officers vice president of regulatory affairs, “87% of schools surveyed by the trade group said they relied on such [debt collection] companies,” and that “the practice and fee structure have been around for decades.” To be sure, the U.S. Department of Education permits nonprofit colleges and universities to impose a fee as high as 40% when students default on Perkins loans, which are loans designed for low-income students.
When student debtors cannot make payments in full on back-owed tuition, along with steep collection fees, they typically cannot register for classes and thus cannot continue their educations. In some cases, these debt collection practices may violate the Fair Debt Collection Practices Act (FDCPA). If you have questions, you should reach out to an Oak Park consumer protection lawyer as soon as possible. Contact the Emerson Law Firm to learn more about how we can assist with your case.
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Friday, August 4, 2017

Wells Fargo Lawsuit Could Impact Chapter 13 Bankruptcy Filers

If you recently filed for Chapter 13 bankruptcy in part to avoid foreclosure, and if your mortgage was with Wells Fargo, it is important to know about a recent lawsuit that alleges fraudulent practices by the bank. In short, according to an article from CNN Money, a married couple who filed for Chapter 13 bankruptcy have alleged that Wells Fargo pushed through “stealth” mortgage modifications after bankruptcy. These new modification terms did in fact modify monthly mortgage payments, but they also extended the terms of the mortgages, resulting in hundreds of thousands of dollars in interest.
Individuals who have filed for Chapter 13 bankruptcy in Illinois could be impacted by the outcome of the case. To better understand the stakes, let us tell you a bit more about the current case against Wells Fargo.
Debtors Allege that Wells Fargo Modified Mortgage without Authorization
In 2014, Christopher and Allison Cotton had a mortgage with 16 remaining years of payments. Due to extensive medical expenses, they filed for Chapter 13 bankruptcy. As you may know, Chapter 13 bankruptcy is often a powerful tool for debtors who own homes and are having difficulty making mortgage payments. When you file for Chapter 13 bankruptcy, an automatic stay can prevent a home from going into foreclosure. Chapter 13 is not a liquidation bankruptcy (like Chapter 7), but rather a type of bankruptcy through which debtors restructure their debts. As such, once a debtor files for Chapter 13 bankruptcy and has a repayment plan approved, she typically will not have to worry about losing her home but instead will make mortgage payments based on the Chapter 13 plan.
What is the basis of the Cottons’ claim against Wells Fargo? They contend that, after filing for bankruptcy, Wells Fargo used a “routine, but little-noticed form to ‘sneak through’” a mortgage modification. The claim alleges that Wells Fargo has used this form to modify mortgages, without authorization, of numerous debtors who have recently filed for Chapter 13 bankruptcy. As the CNN Money article clarifies, “the form is usually used to alert homeowners and the bankruptcy court about subtle shifts in real estate taxes or insurance costs.” In this case, however, “Wells Fargo has been accused of using these documents to make unauthorized and substantial changes to the structure of mortgages.”
For the Cottons, the “stealth” modification resulted in a monthly reduction in mortgage payments, but that modification extended the life of the loan to 40 years.
Case Could Have Far-Reaching Implications for Debtors with Wells Fargo Mortgages
After the Cottons filed for Chapter 13 bankruptcy and learned that Wells Fargo had pushed through a “stealth” modification, they filed a lawsuit. That lawsuit is currently a class-action claim that could impact debtors throughout the country who have mortgages with Wells Fargo and filed for Chapter 13 bankruptcy.
Did you recently file for Chapter 13 bankruptcy, and do you have a mortgage through Wells Fargo? You may have been impacted by the practices alleged in the Cottons’ class-action claim. You should discuss your situation with an Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm to learn more about how we can assist you with your case.
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Friday, July 28, 2017

Does My Bankruptcy Discharge Have Tax Implications?

You may not know this, but most debts that are “forgiven,” or discharged, have tax implications. In other words, the forgiven debt looks like taxable income when it comes time to file your taxes. Does debt forgiven in Chapter 7 bankruptcy or Chapter 13 bankruptcy work the same way? In other words, do you have to pay taxes on the debt that has been discharged?
In short, the answer for debt discharged through bankruptcy is no—this forgiven debt is not considered taxable income by the IRS under federal law (26 U.S. Code Section 108). However, it is important to understand how this process works and to have a clear idea of when you will be responsible for taxes on debt that has been forgiven by a creditor.
Discharged Bankruptcy Debts Do Not Count as Income for the Purposes of Your Taxes
After you file for bankruptcy and receive a discharge of your debts, you might be wondering whether the forgiven debt counts as income when it is time to file your taxes in April. In many cases, debtors may even receive a Form 1099 from each creditor to whom debts previously were owed and that were discharged through your bankruptcy case.
What is a Form 1099? Generally speaking, 1099s are issued by businesses to individuals who receive $600 or more from them during the year, as an article in Forbes explains. Yet there are many different kinds of 1099s, and many of them are issued for amounts much lower than $600. For instance, you could receive a:
  • 1099-INT that specifies the amount of interest earned (such as in a savings account);
  • 1099-DIV that shows dividends for the year;
  • 1099-G that shows what you received in state and local tax refunds or in unemployment
  • 1099-R for any payouts from an IRA;
  • 1099-B that provides information about broker transactions;
  • 1099-S that specifies income from real estate transactions;
  • 1099-MISC, which simply stands for “miscellaneous”; and
  • 1099-C, which provides information on cancelled debt.
Why Did I Receive a 1099-C if I do Not Have to Report the Canceled Debt to the IRS?
Typically, debtors who file for personal bankruptcy in Oak Park or elsewhere in Illinois will receive a 1099-C from each creditor after debt is forgiven through bankruptcy. However, not every creditor will send one of these forms, so if you do not receive one, it does not mean that something is wrong. What you do need to know, however, is that unless you are receiving a 1099-C as a result of a bankruptcy discharge, the amount listed on that Form 1099 must be included in your taxable income for the year when you file for taxes. Canceled debt as a result of bankruptcy, however, does not have to be included.
Why did you even receive a 1099-C if you do not have to report the canceled debt as income to the IRS? In short, companies tend to issue a 1099-C form once they have written off a debt (as happens in bankruptcy). The same form gets used whether the creditor forgave your debt for another reason (such as a debt settlement reached) or following a bankruptcy discharge.
Contact a Chicago Bankruptcy Attorney
Taxes and bankruptcy can be confusing. If you need help, a Chicago bankruptcy lawyer can assist you. Contact the Emerson Law Firm today.
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Wednesday, July 26, 2017

Should I Sell My Disability Payments to Avoid Bankruptcy?

If you recently received a disability settlement, it is possible that a company has contacted you with an offer to give you a structured settlement in exchange for selling some of your disability payments. As an article from the Federal Trade Commission (FTC) explains, this practice is known as “factoring,” and it can have harmful consequences for struggling debtors. What do you need to know about “factoring” and the ways it could impact your ability to pay your bills in the long run? Why might a debtor choose this route instead of filing for personal bankruptcy?
What is “Factoring” and How Does it Work?
In general, “factoring” means that you will “sign over some or all of your disability settlement payments for a period of time.” The lump-sum payment that the company will give you in exchange for your disability payments typically is going to be less in the long run than the total of the disability payments. Why would anyone do this?
Factoring gives struggling debtors a way to get quick cash. However, there are many different issues that can arise with factoring. For instance, companies can charge high fees and interest rates. If you receive a relatively large lump-sum payment, it could have enormous tax implications for you. Are there better options to consider?
Your Disability Benefits may be Exempt if You File for Personal Bankruptcy
There are alternatives to factoring. If you owe a significant amount of debt and cannot make your payments—and do not see a way in which you will get back on track anytime soon—you might also be thinking about filing for consumer bankruptcy. Depending upon the specific facts of your case, you may be better off filing for bankruptcy if you want to get a fresh start financially.
Depending upon the state in which you file for bankruptcy, you may be able to use federal exemptions, or you may have to use state exemptions. Debtors who file for bankruptcy in Chicago must use Illinois Bankruptcy Exemptions (735 ILCS 5/12-1001). Exemptions are assets or property that are exempt from your bankruptcy case. This means, for instance, if you file for Chapter 7 bankruptcy, any exempt property will not be subject to liquidation. Under Illinois law, disability benefits are exempt.
You should speak with a Chicago bankruptcy lawyer to learn more about the disability settlement you received and whether it would be exempt if you file for bankruptcy. If disability benefits represent your primary income, and those benefits meet the requirements for exemption, it could make a lot of sense to consider the benefits of Chapter 7 bankruptcy.
Seek Help from a Bankruptcy Attorney in Oak Park
If you are struggling to pay debts, filing for bankruptcy may be a good option for you, even if you receive disability benefits. An experienced Oak Park bankruptcy lawyer can examine your finances today and can help you to learn more about options available to you. Contact the Emerson Law Firm to speak with an advocate about your situation.
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