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Overcoming Default Judgments

As anybody familiar with my work knows, most debt cases end in either default or “give-up settlements,” where the person sued agrees to everything (or almost everything) the debt collector wants. It is one of the strangest things in all of law: most debt cases that are filed couldn’t be won if they were opposed; but very few people fight. So 90 percent of the unwinnable cases filed in debt are in fact won with the greatest of ease.

Strange.

So what is a default? It is first a court order, and often a judgment immediately or after a short delay, giving the plaintiff – the person who brought the suit – whatever they wanted. It happens when the defendant does not show up or defend himself or herself in court. Note that “default” is not the correct way to describe what happens if you DO show up and lose. The result of not showing up is usually a complete, automatic victory for the plaintiff, and that’s what we’re talking about.

The courts do not “favor” such an outcome. That’s because a case that is won because it wasn’t opposed is not a victory “on the merits” – there’s no real indication it’s fair, and as everybody knows in the debt context, it often is NOT fair. But what can the courts do?

If you have had a default against you, you may have a chance to get that changed. If you take steps, and if they think you weren’t playing games in the first place, they will often reverse the judgment. Then you go back to defending the lawsuit. If you get that far, you will probably win the suit – 90% of winning the case will be in getting the judgment vacated (removed). That will stop collection and start the case over – but if you’re willing to fight, and manage to get the default judgment vacated, you’ll find the rest of it pretty easy.

We have products that can help you do all that.

Foreclosure Fraud

Foreclosure Fraud – Are They Ripping You Off?

As I have argued a number of times, banks seeking foreclosure have been hampered by the “alphabet derivatives” known as “MBS’s” (mortgage backed securities). Often, banks seeking to foreclose on allegedly defaulted mortgages do not own the title to the property in dispute and cannot find it, and therefore cannot (legitimately) pursue their foreclosure actions. It seems that some lenders may have found a convenient way past this objection: systematic fraud.

Fraud in New York

On August 17, 2010, a federal class action suit was filed on behalf of tens of thousands of New York State homeowners who lost their homes to an alleged foreclosure fraud orchestrated for years by a  “foreclosure mill” attorney and major mortgage companies. The case is “Connie Campbell vs. Steven Baum, MERSCORP, Inc, et al.”, Case #10CV3800, filed in the U.S. District Court for the Eastern District of New York. It claims there were various lending and Fair Debt Collection Practices Act (FDCPA) violations and that homeowners paid inflated foreclosure and other fees made up by Mr. Baum on behalf of his clients, the lending institutions.

The alleged foreclosure scheme came to light after the class plaintiff lost her home to a foreclosure filed by Baum for HSBC even though the loan had never been assigned to HSBC. A “Satisfaction of Mortgage” was eventually filed by a company named MERS,  showing that HSBC never owned the loan, and the foreclosure complaint should have never been filed in the first place.

Perhaps tens of thousands of New Yorkers alone have been thrown out of their homes into the street through fraudulent foreclosure actions. As investigations have continued, it has become increasingly clear that the foreclosure violations are rampant and nationwide.

Just Who Are the Barbarians at the Gates of Rome?

Some time ago a prominent social commentator likened people opting out of their non-recourse loans to “barbarians at the gates of Rome.” And last year there was a lot of argument about the morality of individuals pursuing this right for which they had negotiated and paid. Supposedly, these people were taking unconscionable advantage of the poor lenders.

As I pointed out at the time, for people to exercise the rights which they negotiated for against well-heeled and sophisticated lenders was hardly a sign of the “break down” of law and order. It was, in fact, simply the legal process working as it should. In this case in favor of the homeowner rather than the banks, for a change. All the morality talk was designed to hoodwink the public into blaming the homeowners rather than the banks, who for years deliberately fostered lax lending practices as a way to inflate prices and increase their profits.

The Sound of Silence

Let’s just say the silence of these self-appointed guardians of morality about the revealed practices of the lenders affecting tens of thousands at least, and possibly many millions of homeowners defrauded and rendered homeless is positively deafening.

How to Tell the Debt Collector You are Judgment Proof

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Secret Danger of Garnishment to Social Security Recipients

As I have pointed out in my video about garnishing Social Security, Social Security benefits are exempt from most forms of garnishment – the notable exception to that rule is that they may be garnished by certain government entities.

Although Social Security benefits are exempt from most forms of garnishment, I warned that they could still be attached and taken if they are in a bank account that the creditor happens to find. When bank accounts are garnished, they are held by the bank for a time to allow you to fight the garnishment. As a practical matter, you may be unable to fight the garnishment, and thus if you are having trouble paying your bills and have paid for them with an account that holds Social Security benefits, it makes very good sense to switch those benefits to another bank (not just bank account in the same bank) – because once there is a judgment against you the debt collector is bound to attempt to seize any assets in a bank they have on file for you. I realize this can be difficult or disruptive, but if you have paid an original creditor or debt collector out of an account, you must expect that account to be garnished – seized and taken away from you – if the debt collector manages to get a judgment.

If it is seized, you may or may not be able to get the money back, but there will certainly be a delay, and all the money in the account, up to the amount of the judgment, will be held by the bank and unavailable to you.

There is another danger to Social Security recipients.

Social Security recipients are often elderly or disabled, needless to say, and many of these allow other people to do shopping for them or to hold their assets in one way or another to use for their benefits. This money is held in trust and should not be available to debt collectors who are after the person who is holding the money.

Here is an example that might make it clearer. If Mary (a 70 year old woman suffering from Altzheimer’s) is being taken care of by her son Tom, Mary and Tom will frequently find it helpful to allow Tom to use Mary’s account to pay her bills. If Mary’s account contains only Social Security benefits, it should be beyond the reach of any creditor, and because the money is not Tom’s at all, it should not be reachable by Tom’s creditors in any event.

However, sometimes debt collectors will discover that Tom is paying bills using Mary’s account. If his name is on the account, or if he is permitted to write checks upon it, the debt collectors may attempt to garnish the account.

This is not as “evil” as it may first appear. From the debt collector’s point of view, how do they know what bills Tom is paying with the account? People have often tried to hide assets from debt collectors by using other people’s accounts, and the law is designed to let go after the debtor’s money regardless of whose name it is.

On the other hand, the impact of Mary’s account being seized for Tom’s debt can be devastating. Because once again the money will be held out of use for a period of time that allows the parties to prove whose money it is and whether it can be seized. During that time, the elderly person cannot pay her bills, may be evicted, or face other, life-threatening and disrupting events.

Get Legal Advice

Therefore, if you have a judgment against you on a debt you should seek the advice of a lawyer specializing in debt collection before allowing the account to be linked to you in any way. In my opinion, the risk extends beyond just having your name on the account. If you sign checks on behalf of someone else and there is a judgment against you, you may be putting this person at risk. Get legal advice and protect them and you. Better yet, don’t let a debt collector get a judgment against you.

Protect Your Rights

If you are being harassed by debt collectors and worry about paying your bills, you need to be extra alert to protect your rights. These calls are often a prelude to their suing you. Bankruptcy can sometimes be an option, yet it has very high costs. It’s worth considering defending yourself first. Membership with our site gets you our teleconferences and ecourses for free, plus gives you many other benefits. Click here for more about debt law and how we can help you.

Overcoming Default Judgments in Debt Cases

This is a companion to the video, “Procedure for Moving to Vacate Default Judgments.” This video explains why you should try to vacate (remove) a default judgment against you and generally how to go about doing it. The second video goes into a little more detail on that and tells you specifically what documents you will  need to file and what they should contain. If you have defaulted on a debt suit and want to try to reopen it (to prevent collection), check out our product: Motion to Vacate Pack. For a more comprehensive understanding of the debt law and defense, you need our Debt Defense System.

We categorize this video under “collection” because often the way people discover there’s been a default judgment is that there is some action to garnish wages or collect on the judgment. If that’s your situation, it isn’t too late. To prevent the collection/garnishment, you will need to get the judgment against you vacated (eliminated). And the very first step in doing that is finding out what happened. To do that, you will go to the court, look up the judgment, get the file on it, and look in the file to see what happened.

It gets a little more complicated than that after you find out what happened, but there are actions you can take, and our job is to help you figure out which and to do them.

 

Garnishment and other collection methods

Garnishment of Assets – Can they Take your Wages or Bank Account?

Can your wages be garnished by a debt collector? What about bank accounts? Here are some things you need to know about garnishment.

If you have assets, and this includes either a job or money in the bank, you must be concerned about the possibility of being garnished if a debt collector (or anybody else) has a judgment against you.

Bank Accounts

Bank accounts can be garnished and, when they are, it is almost always a surprise to the debtor. What typically happens is collectors obtain money judgments (usually by default) and then use the judgment to freeze the funds in your bank account. State law and banking rules govern how the bank must handle the garnishment process. Collectors always notify the bank first and then notify the debtor. This way your funds are frozen before you can take any action such as withdrawing all your funds.

Their notifying the bank first is perfectly legal. You typically receive the notice (including your rights) a day or two after your funds have been frozen. In most states, the garnishment can not only freeze funds already in your account at the time of service on the financial institution, but can also reach funds that get put in the bank afterward, for a time.

During the time the garnishment is in effect, the financial institution will not honor checks or other orders for the payment of money drawn against your account. This means any outstanding checks will more than likely bounce or be returned for NSF. The exception to this rule is if your account has more on deposit than the amount of the garnishment. In this case, the bank can honor checks up to the amount that will reduce your funds below the amount of the garnishment. When the amount being garnished is paid, the freeze on your account must be terminated.

Wages

Wages can also be garnished, and, again, your first notice that you are being garnished is likely to be when you receive a check that is less than you thought it would be. Federal law limits the maximum amount that can be garnished by one or more garnishment orders to 25 percent of your disposable earnings for that week, or the amount by which disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less. In simple terms, “disposable income” is whatever money you have left after paying all required taxes and national insurances!

Disposable income is after-tax income that is officially calculated as the difference between personal income and personal tax and nontax payments. In general terms, personal tax and nontax payments are about 15% of personal income, which makes disposable personal income about 85% of personal income.

IMPORTANT: In order for wages to be garnished, disposable earnings per week must exceed thirty times the federal minimum hourly wage or $154.50. Put another way, if you make $154.50 or less per week your wages cannot be garnished – for now and as long as you don’t make any more than that. Also – Social Security and some other types of disability or retirement income are protected from collection.

There are also important state rules regarding garnishment, and if you are garnished, or if you bank account is seized (especially), your first move should be to look at the state laws on garnishment and see if an exemption applies to you. They often will.

But You Should Not Let them Get a Judgment

All of the above being said, you will almost always be much better off it you can avoid letting them get a judgment against you. Things could get better for you in any number of ways. Just because things seem bleak now doesn’t mean that the sun won’t eventually shine. And it isn’t all that hard to keep them from getting a judgment if you know what you’re doing.

If you want help fighting the debt collectors, you should consider our new FastTrack Membership. Go here for more information on debt collection and defense, and how we can help you. We can also help you overcome a default judgment.

 

 

What if I Think I Owe the Money?

What if I Really Owe the Money – or Think I Do?

What if you think you really owe the money? Should you defend yourself? Here’s why you must defend yourself. If you don’t you run the risk of having to pay twice. And if you do defend yourself, you probably won’t have to pay. If that bothers you, give the money to somebody who really needs it.

Most People Being Sued Actually DO Owe Someone Some Money

If you’re being sued by a debt collector, you probably think you owe them the money, although it’s surprising how often people who do NOT owe anybody any money get sued. If that’s you – you still need to fight the case, it won’t go away by itself. But if you actually do owe somebody the money for which you are being sued, you still need to be careful.

And you should still defend yourself as well as you can.

You must make the debt collector prove every part of its case – not only that you owe the money, but that you owe it to them. And exactly how much you supposedly owe. That’s because old debts get sold – often more than once – and if you don’t make the debt collector prove it owns the debt, you may pay the wrong person. And then you might have to pay again if you get sued by the person that actually owns the debt.

In addition, most people who get sued for debts do not owe what the debt collectors are trying to collect. They routinely add fees and interest they should not, and consumer protections agencies and organizations routinely estimate that almost all debt collection suits include extra charges – and many of them are for far more than is owed.

“Double-Banging”

Because of the extremely lax regulation of debt collectors, and the frequent erosion of those regulations that do exist, debt collectors develop many dirty tricks. One of the dirtiest is known as “double-banging.” This is the repeated collection of the same debt by the same debt collector.  You may wonder how such a thing is possible, and it would be difficult, no doubt, if these double-bangers didn’t have a couple of things going for them.

One thing that makes double-banging easier is “spoofing.” That’s a technology that allows debt collectors to cause your phone to think the phone call is coming from another number, usually a local exchange. Thus, while your phone tells you the call is from your own telephone area code, it’s actually originating far away. And of course the debt collectors often change their names – not just the people calling, but the companies they’re supposedly representing. So you are receiving a call from a company that already collected from you, and now it is collecting the same debt again under another name. And they don’t necessarily wait till you have paid the debt off the first time, either. In one known case, a debt collector collected the same debt TEN times.

And that was without even suing the victim. They can do that, too.

Ultimately, what makes all this possible is that people let it happen. That is, they get scared, or feel guilty, or get angry… any number of feelings cause you to relax your guard, and then they get you. Instead of requiring them to provide proof, you’re asking how to pay.

And once they get you, you go on a “sucker list.” That’s just what you probably think it is – a list of people who will fall for various scams. Debt collectors sometimes trade these sucker lists to each other, so after one of them has collected as much as possible, they trade your name to another who will do the same thing.

The Good News

The good news about debt collectors is that they usually CANNOT prove their cases if you make put them to the test. The whole process by which they get these debts is so sloppy and careless that they usually cannot find or obtain the proof that they need to win their case. IF you defend yourself.

Protect Your Rights

Our mission is to protect people from the debt collection process. If you are being sued by debt collectors, or if you are being harassed for money, you need to take action to defend what’s yours. For much more information on defending yourself, go to Fast Track to Debt Defense.