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Published by Actuit India on 20th January 2008

Hire Bankruptcy Petition Preparation Services

Since 2008 Actuit has a disciplined team of paralegals to help your bankrutpcy practices. Our digital outsourcing process make sure that team is efficient with your time and you get the best of the outsourcing experience. We make sure that you get benefited from the highest quality system design we have to offer. So that each new client experiences the best that our offshore expert paralegal has to offer

We do limit the number of clients handled by each team.

Save time to manage your bankruptcy practice, spend less & watch your practice grow while we work as your paralegal back office form New Delhi, India.

Is that how you want your bankruptcy case prepared?  Do you want your most personal financial information stored on computers located in India or China?

There is a lot of economic incentive for lawyers to outsource this service:

  • Outsourcing removes the number one overhead cost of most law firms: employee wages.
  • Outsourcing transforms paralegal costs from a fixed overhead item to a variable cost expense.
  • Outsourcing means you need less office space, so you save on rent.
  • Paralegals in India do not receive overtime.
  • Payroll tax burdens are eliminated with overseas outsourcing.  It eliminates the need to file quarterly reports with the IRS.
  • The burden of hiring and firing is eliminated.

I’ve never outsourced my paralegal staff.  I doubt I ever will.  Why not?

For starters, I have found the cost savings illusory.  Sure, I can outsource the labor cost of preparing a bankruptcy petition for maybe $100 to $150 per case.  But outsourcing has many drawbacks.

  • Quality Suffers.  Workers in India simply do not understand life in America (and we don’t fully understand their life either). When you don’t understand your client fully, how are you to ask the client questions to fully explain their financial situation to the court? Paralegals from India are probably fine technicians, but they don’t get the culture and they do not have the experience to explain and document my client’s financial situation.
  • Communication Problems.  I believe that one attorney and one paralegal should be assigned to each client. You speak to the same team every time you call our office.  You know your attorney/paralegal team and they know you. They know your kids names and your favorite football team and a million other details about your family. Bankruptcy cases can last for up to 5 years. That’s an important relationship.  Because we know you better we can serve you better.  Do you think a worker from India can match that?
  • Cost Savings are Illusory.  It may cost less to outsource case preparation, but knowledgeable workers save money in other ways. By providing one-on-one interaction with clients, they perform their job better and that leads to more client referrals. They do their job more efficiently because they have a fuller understanding of the client’s background.
  • Protecting Confidential Client Information.  Bankruptcy attorneys gather a lot of personal information, including tax returns, paycheck stubs, bank account statements, retirement statements, etc. You want that information stored on some computer in India?

It’s one thing to have a car part or a computer chip manufactured overseas.  As a consumer I benefit from the cost savings.  But when it comes to legal services, the push to outsource work is inherently risky.  When I hire a local attorney I don’t want my file sent overseas.

Sam Turco Law

Proudly Made in America

 

Image courtesy of Flickr and Juan Antonio F. Segal

 

 

 

UNLV law professor Nancy Rapoport asks a series of questions in her latest article published in www.ConsiderChapter 13.org.

faculty_Rapoport_NancyTo what extent must a debtor’s attorney personally meet with the client prior to filing the petition on behalf of the client, and how meaningful should the meeting be?

More specifically, how much can the attorney safely and ethically delegate to non-lawyer staff: Intake interview? Filling out forms? Obtaining and reviewing documents like mortgages and paystubs? Telling the client that s/he needs to file chapter 7 or 13? Telling the client what the attorney’s fee will be and getting the client to sign the retainer agreement? Going over the petition and schedules with the client and getting the client’s signature? If the attorney is reviewing the non-lawyer’s work along the way but does not personally meet or talk with the client, is that adequate supervision? What if the only contact the attorney has with the client prepetition is one “facetime” or skype video call, but the non-lawyer assistant does everything else?”

Let me answer the first question very directly: An attorney must substantially communicate with a client prior to filing a bankruptcy petition.  In fact, the communication must be more than just chatting about filing a petition. It goes much deeper than that.  Should the client even consider filing bankruptcy as opposed to some other debt solution, like consumer credit counseling or debt settlement or lifestyle downsizing?

Beyond the discussion of which debt solution is best for the client, it is important for the attorney to figure out the real cause of the money problem. Financial problems are often secondary to a more general personal or family problem.  I may have two clients with identical financial problems but may recommend completely different courses of action based on their personality, education level, age, physical condition, emotional issues, etc.  You must understand the client before you can really understand their financial problem.

Having said that, I am a big believer in building high quality systems of practice.  Delegating tasks to paralegal staff is essential.  In fact, to be unable to delegate is in its own way failing the client.  If an attorney cannot return phone calls because they are too busy doing clerical tasks that could and should be delegated, that is a problem.  Building standard operating procedures driven by checklists and attorney review procedures benefits clients.  Having a paralegal staff trained to think as lawyers and who can respond to client requests quickly is appreciated by clients. Systematically training of staff on all parts of the bankruptcy process is at the core of building a great firm. Delegation is not the problem.

Bankruptcy practice is susceptible to machine-driven operation for many reasons.  Bankruptcy petitions are prepared on standardized federal forms. The process is basically the same from state to state since it is a federal law that plugs in local state exemptions that are very similar, so forming firms that operate in multiple states is common.  Most bankruptcy firms utilize the same computer software packages as well, so the work performed by an attorney or paralegal in New York is almost exactly the same as those who work in California.  Client management software and cloud computing and internet-based telephone systems increasingly allow attorneys to expand geographically. The Matrix is real.

The problem is not caused by staff delegation or the use of technology.  The problem associated with diminishing attorney-client contact is decisional.  The attorney either decides to stay connected to the client or they decide to bum off the job to staff and technology.  You decide to be accessible or you do not. You can build a system either way.

I’ve chosen to build a firm that uses every ounce of talent my staff has and to utilize technology to help us achieve our mission, but to require that each client has a personal relationship with their attorney and their paralegal.  That’s an expensive way to build a bankruptcy practice.  Good paralegals are not cheap and they tend to be sassy.  Great attorneys take years to train and they leave unless they are provided with proper compensation and a sense of self-control.

It’s a lot more profitable to build a bankruptcy mill on cheap labor and technology, but invariably those firms at some point blow up at some point.  They thrive for a while but eventually collapse.

Communicating with clients exclusively over the telephone, Skype, Facetime, or video conferencing is all fine.  The medium does not matter.  It’s the attorney’s commitment to professionalism, caring and the client that matter in the end.  Clients know when they matter. They know when calls are returned, emails are answered, and when the attorney fusses over details.

I think Nancy’s point is that attorney contact with the client must be continuous throughout the case and that some firms are limiting that contact a a quick 10-minute sales consultation.  I could not agree more.

 

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The Home Affordable Modification Program (HAMP) expired December 31st.  After eight years of assisting underwater homeowners save their homes from foreclosure, the program has now ended.

Approximately 10 million homes were lost to foreclosure in the past decade.  HAMP helped lessen the mortgage meltdown, but its job is now complete.  Foreclosure sales have diminished and home prices are now almost equal to the market prices just prior to the housing market bubble bursting in 2008.

So now what?

According to the folks I chat to in the foreclosure industry, expect mortgage service companies to tighten standards and foreclosures to gradually increase during 2017.

Without HAMP, homeowners seeking loan modification will be left at the mercy of lenders.”  Dillon Graham, Florida foreclosure defense attorney.

The Consumer Financial Protection Bureau has issued lending guidelines to help reduce the number of foreclosures in the future, including an emphasis on loan affordability, but those guidelines will do little to help current homeowners who fall behind on their mortgage payment.

I expect to see a new foreclosure trend emerging in 2017:

  • Banks will be quicker to initiate foreclosure actions when a homeowner falls 2 to 3 payments behind.
  • Foreclosure Forbearance Agreements will emerge from an 8-year hibernation and be the primary loss mitigation tool offered by mortgage lenders.
  • Chapter 13 bankruptcy case filings will increase as it provides the the best option to give homeowners 3 to 5 years to cure delinquent mortgage payments.
  • Foreclosures on long-forgotten 2nd mortgage debts will pick up as surging home prices enable banks to recoup some recovery for loans previously underwater.

This cat is now away.  Time for the mice to play again?

 

Image courtesy of Flickr and frankieleon.

Tax Lien

The existence of a Federal Tax Lien in a Chapter 7 bankruptcy case is a dangerous thing. Especially in cases where a debtor has substantial equity in a home or other assets.

Why are tax liens so dangerous?  Because property exemption laws, such as the Homestead Exemption, do not apply to federal tax liens.

Exemption laws protect a debtor’s property when they file bankruptcy. For example, the Nebraska Homestead Exemption protects up to $60,000 of home equity (the difference between the home’s value and the balance of the mortgage).  So, if a debtor owns a home worth $100,000 and the home is subject to a mortgage loan of $40,000, the home is generally protected in chapter 7, unless a federal tax lien is present.

What is alarming is that most bankruptcy attorneys seem to be oblivious to the fact that federal tax liens are not subject to state exemption laws.  In fact, I have spoken to attorneys who falsely believe a federal tax lien actually protects a home since the lien takes away the home equity.  Yes, the lien takes away equity, but it also puts a mighty power in the hands of the Chapter 7 Trustee.

What drives this dangerously false idea of a tax lien protecting property is that few attorneys have witnessed a bankruptcy trustee use the power of bankruptcy code Section 724(b).  I’ve never seen a Nebraska trustee tap the power of 724(b), nor is there any case I’ve seen in Nebraska where a trustee took away a home with this power. Yet, cases exist in other jurisdictions where debtors have lost homes due to the trustee’s use of 724(b).

Martin and Elvira Laredo owned a home in Illinois valued at $320,235 that was subject to a mortgage loans of $245,000.  They owed the IRS $282,268 and reported that a federal tax lien was filed against their home.  The debtors claimed a $15,000 homestead exemption.  In re Laredo, 334 B.R. 401 (2005).  The Chapter 7 Trustee motioned the court for a ruling to determine that the homestead exemption was subordinate to the federal tax lien and the administrative expenses the trustee would incur in selling the home.  The court agreed with the trustee and ordered the home sold even though the only parties who benefited were the IRS and the Trustee.

This result should not surprise bankruptcy attorneys.  Those who represent debtors in Chapter 13 cases should be aware that the IRS will file a secured claim on exempt property when federal tax liens are present.  So, why would the result  in a Chapter 7 be any different?  In theory, the payments to creditors in Chapter 13 should be no less than payments made in Chapter 7 under what is known as the “best interest of creditors test“, so this result should  not be surprising.

At least one Nebraska case has spoken to the power of 724(b), In re Netal, Inc., Case #09-82992.

I suspect the reason we do not see Chapter 7 Trustee’s use the power of 724(b) more is that although the bankruptcy schedules may report that federal tax debts are present, they debtor may not be reporting that a federal tax lien has been filed prior to the bankruptcy.  The debtor’s attorney may also be unaware of the presence of the tax lien unless they perform a public records search.  However, given the duty of a bankruptcy attorney to perform a “due diligence” investigation of the debtor’s assets, income and debts, there is probably a duty to search for and report the existence of such liens.  Also, unless the Trustee seeks out independent confirmation of the existence of the lien, he or she may be ignorant of its presence.  A smart trustee should assume the presence of a tax lien when substantial tax debt is reported even if the lien itself is not disclosed.

A second reason for the lack of 724(b) seizures in Nebraska is the lack of prior history of using this tool.  There is no tradition of 724(b) property seizures in Nebraska, but I suspect that tradition will change over time, especially in a rising housing market.

In conclusion, when substantial tax debts exist, be careful when filing Chapter 7.  Choose your Nebraska bankruptcy attorney carefully.

 

 

 

 

 

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Bankruptcy Code Section 523(a)(6):   A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt . . . for willful and malicious injury by the debtor to another entity or to the property of another entity.

A federal jury has awarded $28.1 million to six plaintiffs (the “Beatrice 6”) for a reckless investigation and manufacturing false evidence conducted by the Gage County Sheriff’s department. The plaintiffs spent 20 years in prison for the 1985 rape and murder of Helen Wilson, but DNA testing conducted in 2008 revealed that the murder was actually committed by another individual, Bruce Allen Smith.

Following their release from prison, the plaintiffs brought suit in Nebraska federal court for the Sheriff Department’s building a case on coerced false confessions.

As a result of this judgment, Gage County has recently signed contracts with law firms to possibly file a Chapter 9 bankruptcy case.  Insurers for the county have denied coverage.

The interesting  and somewhat unusual aspect of this potential bankruptcy case is that Gage County was not in any financial distress prior to the entry of this judgment.  The bankruptcy is contemplated for the sole reason of denying payment to victims of the County’s intentional wrongdoing.

Generally, damages sustained due to “willful and malicious” injuries are not dischargeable under bankruptcy code Section 523(a)(6), but that provision of the law does not apply to Chapter 9 cases involving municipalities and public subdivisions.

So, Gage County may file bankruptcy for the sole purpose of denying payment for the intentional, willful and malicious damages inflicted on the Beatrice 6.

Although the judgment may be subject to discharge, there is certain to be objections to any plan of reorganization filed that proposes to pay less than the full court judgment.  The county still must prove it’s reorganization plan is filed in good faith and that it cannot propose to pay the entire judgment.  In the Detroit, Michigan bankruptcy case it was apparent that the city could not tax itself into solvency, but what about Gage County?  Could the county structure full payment of the judgment if the county raised real estate taxes?  By what percentage would the levy have to increase to pay the judgment?

Gage County has land valued at $3 billion in 2015 according to the Nebraska Department of Revenue.  The county collected $9 million in real estate taxes last year on a levy rate of 29.7 cents per $100 of land value.  Paying the entire $28.1 million judgment in one year would be impossible, but what about paying off the debt over 10 to 20 years?

If paying off the debt in full over 10 to 20 years is possible with only a modest increase of the tax levy, why would a bankruptcy court enable taxpayers of Gage County to avoid this obligation in a Chapter 9 plan regardless of whether the debt is subject to discharge?  How would that type of bankruptcy plan meet the burden of proposing a plan in “good faith?”

It should be an interesting year in Nebraska bankruptcy court for 2017.

 

 

Image courtesy of Flickr and Dave Nakayama

Wells Fargo

Wells Fargo is asking courts to dismiss lawsuits brought by customers for damages caused by fake accounts created by bank employees because of arbitration clauses signed by those customers when they opened bank accounts.

A typical arbitration clause contained in the fine print of bank account agreements looks like this:

ARBITRATION AGREEMENT

Binding Arbitration. You and Wells Fargo Financial National Bank (the “Bank”), including the Bank’s assignees, agents, employees, officers, directors, shareholders, parent companies, subsidiaries, affiliates, predecessors and successors, agree that if a Dispute (as defined below) arises between you and the Bank, upon demand by either you or the Bank, the Dispute shall be resolved by the following arbitration process. However, the Bank shall not initiate an arbitration to collect a consumer debt, but reserves the right to arbitrate all other disputes with its consumer customers. A “Dispute” is any unresolved disagreement between you and the Bank. It includes any disagreement relating in any way to your Credit Card Account (“Account”) or related services. It includes claims based on broken promises or contracts, torts, or other wrongful actions. It also includes statutory, common law and equitable claims. A Dispute also includes any disagreements about the meaning or application of this Arbitration Agreement. This Arbitration Agreement shall survive the payment or closure of your Account. You understand and agree that you and the Bank are waiving the right to a jury trial or trial before a judge in a public court. As the sole exception to this Arbitration Agreement, you and the Bank retain the right to pursue in small claims court any Dispute that is within that court’s jurisdiction. If either you or the Bank fails to submit to binding arbitration following lawful demand, the party so failing bears all costs and expenses incurred by the other in compelling arbitration.

And the sad news is that some judges are actually going along with the bank and dismissing cases.

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Okay, we get it.  Arbitration clauses serve a legitimate purpose of reducing the cost of litigation between banks and its customers.  We can envision that such a provision may help reduce the cost of solving routine issues such as how interest is computed or when late fees apply or other issues regarding the terms of the contract.

But to apply the arbitration clause to fraudulent or even criminal wrongdoing committed by the bank seems to go way beyond what a reasonably prudent customer would anticipate.  Sure, I may expect the arbitration to cover nerdy issues of interest and fees, but do you mean to tell me that customer that is physically assaulted by a bank employee has agreed to binding arbitration when they open up a lousy $10 savings account?  If a rogue group of Wells Fargo collection agents take my daughter hostage until the account is paid, have a agreed to arbitrate this wrongdoing?

My expectation of an arbitration clause is that its application is limited to accounts that I voluntarily open with the bank.  The notion that I have somehow given Wells Fargo the right to arbitrate the murder my family or to open fake accounts without my knowledge is absurd.  The terms of the arbitration agreement are far too vague to permit that interpretation, and even if the terms were clear such an agreement clearly violates public policy and should not be enforced.

Despite some success the bank has achieved in cases so far, I suspect that courts will be reluctant to allow such a vast application of the arbitration agreements going forward.

Wells Fargo still doesn’t get it.  I’m hoping the courts do.

 

Might as Well Win it

Do you know where you want to be in 20 years? What does that picture look like?

When facing debt problems, it is very important to envision what you want your financial life to look like in 20 years.  Because when you fail to have a clear vision of what the ideal life looks like, you tend to repeat the present problem.  Sure, you may get out of today’s financial mess, but then old habits return and the problem resumes.

When facing that life changing debt struggle, it is very important to write down very specific financial goals.  Very specific goals.

  • I want my home paid off by age 55.
  • I will save up 6-months of wages in a savings account.
  • I want to take my grandchildren to the beach every summer until I die.
  • I want to quit my full-time job by age 60 and then work part-time and volunteer more.
  • I want to travel while I’m still young and healthy.
  • I want my student loans paid off before my kids start college.

Why is this important? Because knowing where you want to end up instructs you on what you need to do today.

Want to loose 10 pounds by summer? Then start walking 1 mile today, 2 miles tomorrow, and eat a healthy diet.

Want to pay off the home in 10 years? Well, you have 260 paychecks to get the job done if you are paid bi-weekly.  So, how much a paycheck does it require? (Find out here.)

Want to take a 2nd honeymoon in Cancun, Mexico in 12 months?  How much a paycheck does that cost?

See what just happened?  Your long-term goal affects what you do now.  That is why it is so important to set long-term financial goals.  Without them, you lose track of how to spend that paycheck.

When deciding about whether to file bankruptcy, keeping those long-term goals in mind is important. Sure, you could opt for a debt repayment program and become debt free over 5 years, but will that undermine the long-term goal of paying off student loans or a mortgage?

Solving today’s temporary financial problem is only part of the analysis.  Most people underestimate what they can accomplish over a long period of time. The difference between paying off a mortgage over 15 years instead of 30 years is usually about $100 per month.  That’s really not much more, so why not do it?  A lousy $20 investment per week in a 401(k) plan yields a substantial retirement. Eating 100 few calories per day results in substantial weight loss over a year.

Tell me where you want to be in 20 years and I’ll tell you what you need to do with your money today.

There is only one day in your life that you have power over money, and that day is payday.  What you do or fail to do on payday determines whether you win or lose. Decide to win today.

Champions team

Do Chapter 13 payment plans really work?  How many customers actually finish the plan and become debt free?  How does it stack up to other options like consumer credit repayment plans? If you don’t know how likely a plan of action will succeed, how do you know what to do?

Historically, only one in three chapter 13 cases are completed nationwide.  That is a pretty bad success rate in my opinion.  Law professor Katherine Porter (@bankruptprof)  wrote a provoking article about chapter 13 success rates in 2011 that basically called for an elimination of chapter 13 cases.  Her study confirmed the dismal success rate of these cases.

Chapter 13 is a pretend solution.  I use this term to mean a social program that does not work as intended but is not critiqued or reformed because its flaws are hidden.

That study always struck me as wrong.  It seemed wrong because we were achieving a much higher success rate in Nebraska and in our firm’s cases.  It seemed wrong because chapter 13 has so many advantages over chapter 7 that allow debtors to stop foreclosures, retain work vehicles and basically even the playing field against big bill collectors.

So I began to review success rates of bankruptcy cases and other debt solutions.  In reviewing the 283 Chapter 13 cases our firm filed in 2011, our clients obtained chapter 13 discharges in 198 of those cases.  That is a 70% success rate!  Chapter 7 success rates are even higher.  Of the 321 chapter 7 cases our firm filed in 2011, clients received discharges in 320 cases.  That is a 99% success rate.

Bankruptcy Judge Brian D. Lynch reports a similar success rate for cases filed in the bankruptcy court for the the Western District of Washington.  (See Measuring Success in Chapter 13)    Another study by Ed Flynn of the American Bankruptcy Institute (Chapter 13 Revisited) revealed a nationwide chapter 13 completion rate of 50% for confirmed cases.

HOW DOES CHAPTER 13 STACK UP TO OTHER DEBT SOLUTIONS?

It is important to know the average success rate before starting a debt program.  Here is what our studies indicate:

  • Chapter 7.  Nationally, about 95% of chapter 7 cases complete successfully.
  • Chapter 13.  It varies a lot from state to state and from law firm to law firm.  Success rates vary from 40% to 70%.
  • Credit Counseling Payment Programs.  This is a hard figure to track since the credit counseling industry does not publicly report their success rate. But industry insiders report success rates of 20% to 25%.   (See this article:  Does Credit Counseling Work?)
  • Debt Settlement.  The “save-up-and-settle” programs are basically a scam with success rates well under 10%.
  • Dave Ramsey Debt Snowball Plan.  There is absolutely no reliable information about the success rate of these programs.  I would estimate that only about 1 in 3 of those folks who begin this program become debt free.

WHY DO SOME BANKRUPTCY FIRMS HAVE HIGHER SUCCESS RATES?

Success is no accident.  Some attorneys just work harder at it and have a higher commitment rate to clients.  In every chapter 13 case there comes a time when a client needs help.  Clients get injured and they lose jobs or go through divorce and they face many other problems that can cause a payment plan to fail.  Successful chapter 13 attorneys have many tools to help clients through temporary problems:

  • Motion to Suspend Payment.  From time to time a debtor may ask the court to stop or reduce the bankruptcy payment if good cause exists.
  • Amended Plans.  When income decreases due to lower paying jobs or expenses increase due to medical problems, the original plan may be amended to make the payment affordable.  Skilled attorneys know how to adjust payments when circumstances change.
  • Home Loan Modifications.  Chapter 13 can stop a home foreclosure and give a homeowner extra time to modify their home loan.  When home loans are modified the monthly bankruptcy payment can be lowered typically.
  • Referrals to Tax and other professionals.  A good chapter 13 attorney can refer clients to other skilled professionals.  Perhaps a client needs great accountant to prepare tax returns.  Perhaps a good real estate agent is needed.  Getting clients to the right professional help is key.
  • Understanding the Real Cause of Financial Problems.  Money problems are often secondary.  Listening to your client and helping guide them through difficult times can make a real difference.

Does chapter 13 work?  The evidence is overwhelming.  In the hands of a skilled attorney, chapter 13 is a very real debt solution.

wells-fargo-scams

Wells Fargo Bank has admitted to opening millions of customer accounts and credit card accounts without customer authorization since 2005.  Stories have emerged of a bank gone wild where employees working in an intense sales culture felt pressured to open new accounts to meet sales quotas.

Wells Fargo has agreed to pay $185 million in fines to the Consumer Financial Protection Bureau.

So what happens when customers file bankruptcy on credit card accounts fraudulently opened without any authorization?  Naturally, Wells Fargo filed bankruptcy Proof of Claims with the court itemizing the amounts not legally owed.  And that reality leads to the next logical question:  Has Wells Fargo committed bankruptcy fraud for filing false proof of claims?

False Claims—18 U.S.C. § 152(4):

A person who…knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney;…shall be fined…, imprisoned…, or both.

It would be hard for Wells Fargo to argue that it has not “knowingly and fraudulently” presented false claims in bankruptcy proceedings since they authored the false debt.

HOW DOES A BANKRUPTCY ATTORNEY IDENTIFY FRAUDULENT WELLS FARGO CLAIMS?

A tougher question for bankruptcy attorneys is how they will be able to distinguish valid claims filed by Wells Fargo from the fraudulent claim.  All the claims look the same, so how do you tell the difference?

Most claims filed in bankruptcy cases do not attach copies of signed credit agreements, so it is unlikely that clients will be able to spot fraudulent claims either.  Signed credit agreements are becoming a thing of the past and it is extremely rare for a proof of claim to include a copy of a signed revolving credit card agreement.

The Wells Fargo scandal highlights a major problem with this new age of “inferred consent” in the credit card industry.  As the the industry has moved away from traditional signed credit agreements to modern methods of assent over the phone or internet, it becomes increasingly difficult for consumers to deny liability for revolving credit accounts.  Increasingly, credit card bill collectors sue not under traditional breach of contract legal theories but under Account Stated doctrines where liability is claimed because the liability is stated in monthly account statements.

So, if a Wells Fargo Proof of  claim does not attach copies of signed credit agreements, how can we be sure the debt is real?  How should debtor attorneys react to all Wells Fargo claims?  Should objections be automatically filed to every Wells Fargo claim until they can be verified?  If no written agreement can be produced, should it be assumed that the debt is invalid?  Should the bank be entitled to recoup the money loaned without interest under some type of Quantum Meruit or Unjust Enrichment theory?

This latest Wells Fargo scandal poses a major dilemma for Wells Fargo, bankruptcy attorneys and the court.   Generally speaking, the filing of a proof of claim is prima facia evidence of the validity of a debt.  Does that legal presumption belong to Wells Fargo claims going forward?

carpetbagger

Junk debt buyers are the modern version of a post Civil War carpetbagger as they suck money out of every county in the State of Nebraska without contributing anything in return.  I cannot think of a single positive thing these debt collectors contribute to our state.

Junk debt buyers typically purchase defaulted credit card accounts for about 3 to 7 cents on the dollar.  Common debt buyers include Midland Funding, Portfolio Recovery Associates, Calvary Portfolio Recovery, Cach LLC, Asset Acceptance LLC, and many others.

Debt buyers clog our courts with collection lawsuits.  In a sense, the debt buyer is in a race to recover its investment before the debtor is garnished by another creditor or files bankruptcy, so they are quick to file lawsuits after acquiring the debt.

Most junk debt buyers are located outside the State of Nebraska.  Consider the damage they do to our state:

  • Nebraska courts are clogged with tens of thousand of junk debt buyer lawsuits annually. Our taxpayers are burdened with providing enough judges and court personnel to handle these lawsuits.
  • Debtors lose up to 25% of their paychecks and all of their bank account balances due to garnishments.  Where does all that money go?  To the debt buyers residing in other states.
  • Every dollar garnished by junk debt buyers is a dollar not spent in the Nebraska economy.
  • Junk debt buyers pay no taxes to Nebraska.

So why is Nebraska allowing junk debt buyers to suck money out of our state, to burden our courts with tens of thousand of lawsuits, and to economically damage working families in our state without paying anything back in return?  What is Nebraska getting out of this arrangement?  I honestly cannot see why Nebraska is being so generous to these carpet-bagging outsiders.

Perhaps or legislators should consider a few modest reforms:

  • Debt buyers that file more than 100 lawsuits per year should be required to register with the Nebraska Secretary of State and pay an annual licensing fee.
  • Debt buyers should not be awarded Default Judgments on credit card accounts unless they can provide the courts with a copy of the signed credit agreement.
  • Debt buyers should not be allowed to garnish more than 10% of a debtor’s wage income or bank account balances.
  • Telephone collection calls should be limited to one call per week.
  • Junk debt buyers should pay state income taxes on the revenue they generate from our state.

Debt buyers are certainly entitled to enforcement of the contracts they purchase, but such rights should not cause an undue burden for the taxpayers of our state.  If they want the benefits of our efficient court system, they should pay their fair share of the cost of that system.