Friday, March 24, 2017

Commission on Consumer Bankruptcy to Recommend Improvements

Does the current system for consumer bankruptcy in Illinois and across the United States work as it should? For instance, does the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) actually function to prevent abuses in Chapter 7 bankruptcy filings? Has federal law caught up with the practical needs of debtors in our current decade? In particular, do we need to rethink the ways in which federal bankruptcy law deals with student loan debt given the enormous amount of student debt owed by consumers throughout the nation?
These are just some of the questions that will be addressed by the Commission on Consumer Bankruptcy. In the meantime, what else should you know about the Commission, as well as how current bankruptcy laws may impact you?
Goals of the Commission on Consumer Bankruptcy
According to a press release from the American Bankruptcy Institute, the Commission on Consumer Bankruptcy is a new 15-member panel that was put together to “examine the consumer bankruptcy system and issue a report with recommended improvements that can be implemented within the existing structure.” Some of those improvements involve goals of “moderniz[ing] the consumer bankruptcy system with practical and cost-effective recommendations, building on the framework established by the Bankruptcy Code of 1978 and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.”
To gather information with the aim of issuing its final report, the Commission will use an “open, information-gathering model that will allow interested parties across the consumer bankruptcy spectrum to provide input.” In other words, it will not be just lawmakers or members of the judiciary who will be able to voice their concerns about the current bankruptcy system. Consumer protection advocates, as well as debtors themselves, will be able to provide important information and concerns to the Commission.
Who is in charge of the Commission? It is co-chaired by two retired bankruptcy judges. The Commission Reporter, who will “assist in operations and draft the final report,” is a law professor at the University of Illinois College of Law.
Specific Items for the Commission to Address
One of the more specific items on the Commission’s agenda is student loan debt and consumer bankruptcy. A recent article in the Wall Street Journal highlighted how “the federal bankruptcy law’s failure to help heavily indebted borrowers of student loans will be studied by a new panel of law professors, federal judges, and consumer advocates.” The article emphasized the current “consumer bankruptcy system’s lack of power to fix student loan debt” among other significant matters.
Why do we need to better address student loans and bankruptcy? When a consumer files for Chapter 7 bankruptcy, it is difficult to have student loan debt discharged. Moreover, a Chapter13 bankruptcy filing—which involves a three-to-five-year repayment plan, often does not account for the extended length of time necessary to repay substantial student loan debt.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about filing for personal bankruptcy? An experienced bankruptcy attorney in Oak Park can speak with you today. Contact the Emerson Law Firm to learn more about how we can assist you.
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Wednesday, March 22, 2017

Student Loan Debtors Lose Protection from “Overzealous” Collectors

If you default on your student loans for a brief period but begin repaying as soon as you can, are there protections in place to prevent debt collectors from charging you substantial fees? According to a recent article in Time Magazine, such protections used to exist, but the U.S. Department of Education recently rescinded that rule, which “prohibited student loan guaranty agencies from collecting jumbo fees from defaulted borrowers who quickly resume paying.” In other words, student loan borrowers already are being impacted by the current administration’s position on consumer protection.
What else should you know about the U.S. Department of Education’s current position on student borrowers and student loan debt?
How the Rules Can Change Under the Current Administration
What was the Obama-era rule that has been rescinded with regard to student loan borrowers and brief periods of default? As the article explains, the original rule took effect in July 2015, and it prevent guaranty agencies (also known as the “bodies that administer federal loans made before 2010”) from collecting fees from borrowers who default by respond to default notices within 60 days and both agree to and honor a repayment plan. To be clear, the rule was aimed at preventing student loan borrowers from accruing additional fees as a result of a temporary period of default from which the borrower recovered.
The loans that were subject to this rule were those from the Federal Family Education Loan (FFEL) Program. In 2010, that program was phased out, and the U.S. Department of Education began lending directly to student borrowers. As such, the rule did not apply to more recent borrowers who borrowed from the federal government and then defaulted.
However, according to the current U.S. Department of Education, the July 2015 rules should have undergone a public comment period. As such, “the department won’t require agencies to comply with the rule without an opportunity for public comment.” However, it is not yet clear whether the U.S. Department of Education plans to “present the rule for public comment.” If the Department does not seek public comment, it seems likely that the rule will not be put into place again—at least for now.
Why is Defaulting on a Student Loan Such a Big Issue?
Why was this rule so significant, and what does its rollback mean in practice? As the article clarifies, “about 8 million borrowers have defaulted on $137 billion in education debts.” Default begins after a borrower has missed nine months of payment. According to Rohit Chopra, a fellow at the Consumer Federation of America, rolling back the Obama-era rule could prove devastating. He emphasized that rescinding the rule could “exacerbate the tidal wave of defaults” that are likely to be coming. He explained, “with more than 3,000 Americans defaulting on a student loan every day, this just adds insult to injury.”
How costly is defaulting on FFEL loans? The rule actually arose in connection with a specific borrower’s lawsuit related to a $4,500 fee after she defaulted on student loans totaling $18,000. To put that figure another way, the guaranty agency charged 16% even though the borrower contacted the agency and agreed to a repayment plan.
Contact an Oak Park Consumer Protection Lawyer
We will need to wait and see how this rollback plays out. In the meantime, if you have questions about managing student loan debt or other consumer debts, an experienced consumer protection lawyer in Oak Park can help. Contact the Emerson Law Firm today.
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Thursday, March 16, 2017

Can Health Insurance Limit Medical Debt?

Can health insurance limit medical debt and help Chicago residents to avoid personal bankruptcy? While it might seem logical to assume that having health insurance can greatly reduce the amount of medical debt a person owes, and thus make the likelihood of having to file for Chapter 7 bankruptcy less likely, this may not be the case for numerous Americans. According to a recent report from ABC News, the Kaiser Family Foundation released data showing that “an increasing share of Americans find it difficult to pay for health services even if they have insurance.” Health services are among the leading causes of consumer bankruptcy in the country. An article from CNBC indicated that around two million people file for bankruptcy each year as a result of unpaid medical bills, and that high numbers makes “health care the No. 1 cause of such filings, and outpacing bankruptcies due to credit-card bills or unpaid mortgages.”
If health insurance is not making a sufficient difference in health care costs for consumers, are there other ways to manage medical debt? If healthcare-related debt has become insurmountable, is personal bankruptcy a good option for you?
Difficulty of Affording Health Insurance and Meeting Policy Deductibles
How difficult is it for Americans to afford health insurance? Even when health insurance is affordable, is it possible to meet insurance policy deductibles without taking on crippling medical debt? According to the data from the Kaiser Family Foundation, 37% of Americans reported that they “found it difficult to afford their health insurance” in 2017. That number rose from 27% in 2015. Even more significant, however, is the number of Americans who indicated that they “found it difficult to meet their policy deductible.” The data shows that 34% of policyholders had difficulty meeting their deductibles as of 2015, and that figure has risen to 43% in 2017.
The Kaiser Family Foundation also indicated that a high percentage of Americans who have health insurance are postponing medical care because of the out-of-pocket expenses. The report contends that “27% have postponed seeking health care because of the cost.” This information is particularly important at a time when Congress may be repealing and replacing the Affordable Care Act. While the Affordable Care Act has both opponents and proponents in Congress, there is a bipartisan recognition that we need to do more to keep the costs of health care down, especially for those who need medical treatment and may avoid it in order to limit debt. Currently, the Urban Institute shows that around 25% of seniors (aged 65 and older) have unpaid medical debts.
Medical Debt, Debt Collectors, and Personal Bankruptcy
The Consumer Financial Protection Bureau (CFPB) identifies medical debt as the cause for the highest number of calls from debt collection companies. Even with health insurance, the fine print of the policy can lead individuals and families to owe thousands of dollars. How do insured patients end up with substantial medical debt? The following are some reasons:
  • High deductibles;
  • Denied claims from the insurer;
  • Care from out-of-network vs. in-network healthcare providers; and
  • Failing to obtain preauthorization.
For many of the reasons cited above, if a patient is able to learn more about his or her policy and to double-check that she or he obtains preauthorization and uses and in-network provider for all services, some of the debt can be avoided. When medical debt becomes too difficult to manage, however, personal bankruptcy may be a helpful solution for you.
Contact a Chicago Bankruptcy Lawyer
If you have concerns about your eligibility for Chapter 7 bankruptcy or questions about managing medical debt, an experienced bankruptcy attorney in Oak Park can assist you. Contact the Emerson Law Firm today for more information.
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Friday, March 10, 2017

Alleged Violations of the Fair Credit Report Act

When a credit bureau fails to properly report a bankruptcy discharge on an Illinois resident’s credit report, does the consumer suffer irreparable harm? According to a recent article in the Madison-St. Clair Record, a court in the U.S. District Court for the Southern District of Illinois will decide whether a group of credit bureaus and credit furnishers violated the Fair Credit Reporting Act by failing to make clear that a consumer’s particular debts were discharged through personal bankruptcy.
What rights does a consumer have under the Fair Credit Reporting Act (FCRA)? What are the available remedies when there is a violation?
Details of the Recent Lawsuit
What are the details of the recent lawsuit alleging violations of the Fair Credit Reporting Act? According to the article, the plaintiff filed a claim against a number of entities, including: TransUnion Consumer Solutions LLC, Experian Information Solutions Inc., Bank of America, and American Honda Finance. In the complaint, the plaintiff alleges that these defendants “failed to indicate that his debt was discharged in bankruptcy and that it was scheduled to continue on record until December 2019.”
What damages is the plaintiff seeking? The plaintiff first seeks compensatory damages. He contends that he has suffered economic losses related to the alleged FCRA violation, such as out-of-pocket expenses and increased costs for insurance and credit. In addition, the plaintiff seeks non-economic damages related to emotional distress. The plaintiff has also sought punitive damages, which typically are awarded only in egregious cases. Unlike compensatory damages, which are intended to compensate the victim for losses sustained, punitive damages are designed to punish the defendant for wrongdoing and to deter similar behavior in the future.
What kind of bankruptcy-related information can go on your credit report, and how long can it stay there? As an FAQ sheet from explains, typically completed Chapter 13 bankruptcies can stay on your credit report for 7 years, while Chapter 7 bankruptcies can stay on your credit report for 10 years.
FCRA Protections for Consumers
Is the FCRA designed to protect specifically against the type of allegations levied by the plaintiff in the case mentioned above? According to a fact sheet from the FTC, the Fair Credit Reporting Act provides some of the following protections to consumers in Oak Park and throughout the country:
  • Anyone who uses information in your credit report must tell you if your file has been used against you;
  • You have the right to know what is in your credit file;
  • You have the right to ask for your credit score;
  • You have the right to dispute information that is incomplete or inaccurate in your credit report;
  • Consumer reporting agencies are required to correct or delete any information in your credit report that is inaccurate, incomplete, or unverifiable;
  • Consumer reporting agencies are prohibited from reporting negative information that is outdated;
  • Consumer reporting agencies are limited in terms of providing information in your credit report to others;
  • Employers are required to get your consent before obtaining information in your credit report; and
  • Consumers whose rights have been violated under the FCRA can seek damages from violators.
What are potential damages? This can vary depending upon whether you file a claim in state or federal court, but in general, plaintiffs can be eligible for actual damages as well as for attorneys’ fees.
Contact an Oak Park Bankruptcy Lawyer
Do you have concerns about information in your credit report related to your bankruptcy filing? An Oak Park bankruptcy attorney can answer your questions today. Contact the Emerson Law Firm for more information.
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Wednesday, March 1, 2017

Chicago Federal Judge Rules on Debt Collection Calls

When a debtor in the Chicago area requests that a debt collection company stop making frequent calls and the collector continues anyway, does the debtor have any recourse? Under the Fair Debt Collection Practices Act (FDCPA), debt collectors cannot harass consumers even if they owe debts. Specifically, Section 806(5) clarifies that a debt collector is prohibited from “causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.”
More often than not, debtors will rely upon the FDCPA in order to make allegations about debt collection harassment or unfair debt collection practices. However, as a recent article in the Cook County Record explains, debtors also may be able to rely on the Telephone Consumers Protection Act (TCPA). A Chicago federal judge recently refused to dismiss a lawsuit brought by a consumer under the TCPA for repeated and unwanted telephone contact from a debt collection company. What are the details of the claim, and how might its outcome clarify consumer rights in the Chicago area?
Learning More About the Recent Case
In the case at issue, a Chicago debtor—the plaintiff in the case—owed money to the healthcare company Alere, which hired the debt collection service Uptain to collect on debts owed. Uptain began calling the plaintiff through an automated dialing system in December 2013. According to the specific language of the TCPA, there are restrictions on the use of automated telephone equipment to protect consumers against unwanted phone calls. The plaintiff argued that she told Uptain to stop calling her because she had plans to file for personal bankruptcy. However, according to the plaintiff, Uptain continued to make automated calls in an effort to collect on the debt.
By July 2014, the plaintiff had filed for consumer bankruptcy, and Alere received notice of the bankruptcy (so that the healthcare company would hold off on trying to collect on the debt owed by the plaintiff). However, the plaintiff alleged that Uptain continued to call her up through May 2015 when she filed a lawsuit under the TCPA. Alere and Uptain contended that the plaintiff failed to show a “concrete harm,” and thus moved for the case to be dismissed.
Looking to U.S. Supreme Court Precedent in Chicago
Why is a “concrete harm” something that the plaintiff would need to allege? A recent U.S. Supreme Court case, Spokeo v. Robins, clarified that a plaintiff must show that she has suffered a concrete and particularized injury for a case to proceed.
Chicago federal Judge Robert Gettleman decided that the continuing calls from Uptain could in fact be considered a concrete harm or injury, and as such, the case will move forward. As the article notes, other courts in the Seventh Circuit have held similarly, and as such, the recent decision appears to be falling in line with other nearby federal courts. Whether the plaintiff will win the case under the TCPA, however, is yet to be determined.
In the meantime, if you have questions about filing a lawsuit against a debt collection company, an experienced Oak Park consumer protection attorney can assist with your case. Contact the Emerson Law Firm today for more information.
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Friday, February 24, 2017

Illinois Attorney General Sues Student Loan Company for Deceptive Lending

Last month, we discussed a significant federal lawsuit against Navient, a prominent student loan company. Yet the student lender is facing more than just a federal lawsuit. According to a press release from the Office of the Attorney General of Illinois, Lisa Madigan has also sued Navient and Sallie Mae for what the office describes as “rampant student loan abuses.” Why is Madigan’s lawsuit important for consumers in Oak Park and throughout the Chicago area? In short, as the press release explains, Madigan has sought restitution for “all borrowers affected by Navient’s unlawful practices” and has requested in her lawsuit that the lender “rescind or reform all contracts or loan agreements between Navient and any Illinois consumers affected by the company’s unlawful practices.”
Madigan’s complaint emphasizes the importance of consumer protection in Illinois, and it also highlights that many Chicago-area residents are not being treated fairly when it comes to student loan repayment.
Background of Madigan’s Complaint
Madigan’s lawsuit names Navient Corporation and its subsidiaries of Navient Solutions Inc., Pioneer Credit Recovery Inc., General Revenue Corporation, and Sallie Mae Bank as defendants. The complaint highlights how Navient began as Sallie Mae, and that for years, according to Madigan’s lawsuit, the company has been engaged in deceptive lending practices that have harmed student borrowers in Illinois (and across the country).
Specifically, Madigan stated: “My investigation found Sallie Mae put student borrowers into expensive subprime loans that it knew were going to fail.” Madigan went on to explain how “Navient’s actions have led to student borrowers needlessly carrying billions of dollars in debt,” and she underscored that “the company must be held accountable.” The attorney general also noted that the lender has been in business for decades, and has played a role in every stage of the lending process. Madigan alleged that the company’s size as a lender, and its continued growth over the years, has been due in part to the harmful lending practices in which it engaged.
Problems in Loan Origination
In Madigan’s complaint, the attorney general alleges that the deceptive lending practices at Navient begin at the point where student loans begin—in loan origination. The lawsuit argues that both Navient and its predecessor, Sallie Mae, “began peddling risky and expensive ‘designed to fail’ subprime loans to student loan borrowers across the country.”

What is a subprime loan? In short, as the Consumer Financial Protection Bureau (CFPB) explains, a subprime loan—which can be anything from a student loan to a mortgage—is one that has a very high interest rate, which makes the situation such that the borrower likely will not be able to repay the loan. The Navient and Sallie Mae loans also came with high fees that added onto overall costs. Moreover, these loans often were offered to students at for-profit colleges, where the students were unlikely to obtain jobs that would allow them to repay what they owed.
The attorney general analogized the subprime lending of Sallie Mae and Navient to mortgage services who played a role in the foreclosure crisis: “Sallie Mae’s conduct was similar to what Madigan saw years ago when she investigated our country’s largest subprime mortgage lenders for their role in the mortgage crisis.” The complaint alleges that harmful lending practices went beyond origination issues, however. The deceptive lending practices, Madigan argues, extended into Sallie Mae’s and Navient’s servicing of the loans, as well as how they handled defaults.
Contact a Consumer Protection Lawyer in Oak Park
If you have questions about how Madigan’s lawsuit may impact you, or if you believe your student loan company has engaged in harmful lending practices, you should speak with an Oak Park consumer protection lawyer. Contact the Emerson Law Firm today.
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Debt Management Plans Versus Consumer Bankruptcy