Archive for the ‘ Abuse ’ Category

Wells Fargo: Worst Bank Ever? Part IV…

I’m cheered to see that others out there share my opinion of Wells Fargo Bank. For my prior screeds against this bank, see here, here, and here.  My rants against Wells Fargo may soon have as many volumes as the Harry Potter books.

Seriously, I worried that my dislike of the bank might be overblown but obviously not when ever-more-harrowing details of their practices keep coming to light, such as those recently provided by The Atlantic and Rolling Stone.

We should all be riding on the Wells Fargo stagecoach: to get as far away from that bank, as fast as possible.

Wells Fargo: Worst Bank EVER, Part III

I took a client through a chapter 7, and got her a discharge.  She and I were done, and she had no more personal debt. Then she sought a loan modification with Wells Fargo.

I knew that she was doing a loan modification because Wells Fargo sent me dozens of letters saying that this is how her loan mod is going, that they are communicating with me because I am the attorney of record, and please forward the correspondence to the client.  I wrote back five times saying, in effect, talk to her directly because I don’t represent her in the loan modification, and yes, I’m forwarding your correspondence to her anyway.

Then they sent a letter saying that because they were trying to get in touch with me and hadn’t heard from me, that they were shutting down the loan mod.  I went ballistic, and let the bank know how upset I was.  See Exhibit A. I also called the Wells Fargo functionary writing to me, left outraged messages, and copied the bank president.

Three more letters arrived in the next week: “please forward to your client, as we can’t talk with them directly.”  I had the brainstorm of sending them an invoice for my time.  See Exhibit B.

This got Wells Fargo’s attention.  Someone called me to tell me that the loan modification was going just fine with my former clients, it wasn’t being dropped, and that the bank was indeed dealing with them directly.  “Ignore our letters.”  They just don’t have the capability of turning off the automatic stream of letters.

They also said that they had gotten my invoice, were considering it, and would give me an answer.

The bank’s ultimate answer floored me. See Exhibit C and the check.

I’ve worked in big organizations before, and there is a lot of waste and mismanagement. This one gives me little confidence in the way that Wells Fargo Bank is being run, even if it did help my bottom line.

Who Really Owns Your Debt?

I deal a lot with bill collectors.  Here is an eye-opening description of how their business works.

Settling a debt can be . . . .unsettling.  If some unknown company collects on a credit card debt that’s five years old, how do you know that the collector actually has the right to collect that debt and declare it done with?  I always ask for a written settlement contract specifying that the collector has the right to collect.  It’s also important to get a company name and physical address.

Unlike these “investors,” I would never pay a cent for debt that was more than three years old.  The statute of limitations runs out on it, and the collector no longer has the legal right to collect.  The debt collector, though, sees a moral right to collect, and no law stops him from collecting on a debt that is decades old.

Education is the best defense against these people.  If you need help from debt collectors, give me a call.

Two Good Reasons to Avoid Post-Bankruptcy Loans

A client sent me a letter he got from a car dealership touting the financing he can get even though he is currently in bankruptcy.  You can find a copy of the letter here.

How does a car dealer think of a person going through bankruptcy? Desperate? A victim?  I do not see any financing terms here.  However, I would almost guarantee that this is not a good deal for anyone.  I have seen financing companies impose 8 percent interest on car loans – per month.  That’s almost 100 percent per year.  The letter suggests getting rid of your current car and getting a new one, so that you can re-establish your “good” credit.

A good credit rating, of course, just means that you will pay less to borrow money in the future.  I recommend that my clients avoid borrowing a lot of money after bankruptcy, because borrowing got them into trouble in the first place.  When there is a real need to re-establish credit, there are better ways than to buy a new car on credit.  Take a look at this article for better ideas.

So the first good reason to avoid this solicitation is because it is unlikely to be a good deal.  The second reason? This guy is in Fontana. I don’t care if you are bankrupt; I don’t want my clients to need to go to Fontana for a car.

Payday Lenders

Here is a very amusing and outraged report on “payday lenders” from John Oliver, the British reporter who apprenticed with Jon Stewart and Steven Colbert.

He’s accurate in presenting the problem: desperate and unthinking people can get money easily, but they will pay astronomical interest and the lenders are unscrupulous when it’s time to collect.

Few of my clients have “payday loans” to discharge, but one in particular stands out because the creditor threatened to arrest her. Actually, the creditor still threatens arrest today, but also gives no return address so I can’t serve it with papers to get an injunction and an award of attorney’s fees.

John Oliver bemoans the lack of regulation against these predators. I don’t see that better regulation will do much; industries almost always “capture” the governments trying to regulate them. Any industry has more capital and focused energy than the members of the general public who are exploited by the industry. Lawmakers will always listen respectfully to the industry’s side of the story, no matter how unconscionable their actions, because the industry can show results at election time.

On an issue like this, I become somewhat libertarian. The best defense against these predators is education, not regulation.

I love having my 18-year-old daughter work in my law firm.  She’s smart and motivated.  She gets to see law in action.  She’s done wonders for my website, and she gets the mail out.

She keeps a timesheet.  I pay her through a payroll company, which withholds funds for income and social security taxes, among other deductions.

Not every employer is as honest and real-world as I am about the employment relation with a child.  Hiring your child is perfectly legal, in fact, I encourage it, but it must be done carefully and transparently.  Some parents mistakenly believe that if they take some of their income and pay a child, they may take a deduction on the payment to the child and the child will pay tax at a lower marginal rate than the parent: a seeming win-win. Not so.

The IRS frowns on these schemes. The latest person to fall foul of the rules is a Ms. Patricia Diane Ross, who took her case to the Tax Court and lost: T.C. Summary Opinion 2014-68.

Ms. Ross owned a Schedule C business, Ross Professional Services, LLC, that helped government agencies staff their operations.  She had three children, ages 8 through 15.  The children, according to Ms. Ross, shredded paper, stuffed envelopes, copied, sorted checks, filed documents, put out the trash, carried equipment, and helped her shop for supplies. For these tasks, she paid the children.  But she made some mistakes that came back to haunt her:

  1. She paid the children in pizza.  Rather than give the children a paycheck, she claimed she kept a ledger of how much they had earned and deducted the cost of their restaurant meals and a tutoring/play activity service from that ledger.  These expenses sounded to the IRS and the Tax Court judge more like the regular kind of a support that a parent is expected to give to her children.

When I represented the Commissioner of Internal Revenue, I came across a family that paid their minor children a very regular wage: $5,000 twice a year, two days before the children’s private tuition bill was due.  The tuition bill got paid out of the children’s accounts.

Lesson one: if you employ your children, pay them in money rather than support.

  1. She did not pay a regular hourly wage.  Dividing “wages” paid by the hours Ms. Ross reported for each kid resulted in an hourly wage varying from $4 to $30 with little correlation between the child’s age, skill, or task, and the wage paid.

Lesson two: if you hire your child, keep good timesheets and pay a regular wage.

  1. She did not withhold Federal income tax or other deductions, saying that the children did not need to file tax returns.  But anyone who makes more than the standard deduction ($6,200) plus the exemption amount must file a tax return.  When the child is being claimed as a deduction on Mom’s tax return, the exemption amount is zero.

Lesson three: treat your employed child as a real employee subject to withholding.

  1. The children got paid for chores: “the activities performed by petitioner’s children seem analogous to . . . washing windows, cleaning screens; shoveling snow; moving grass; tending shrubs, trees, and underbrush; assembling papers; picking up mail.”  The Court found these activities sounded more like parental training and discipline, not services performed by an employee for an employer.

Lesson four: pay your children only for tasks that advance the business, not for tasks that advance the household.

  1. She did not give the children their own bank accounts.  Well, the children actually had bank accounts about 200 miles away (where their father lives?), but Ms. Ross said she was too busy to open local accounts for them.  Thus, she said, it was “more convenient” to pay for things as the children directed her to, matching spending against their “earnings.”  It does not appear that the judge found this explanation convincing.

Lesson five: give your employed children real accounts in a real bank.

I am pleased to say that, if the IRS were to audit my law firm, it would find that my daughter’s earnings are real earnings and a real deduction from the income I collect.

 

 

 

Misleading Radio Ads

I heard a radio ad about solving IRS problems. “It’s a fact that when you owe $10,000 or more, the IRS can take your car, your house . . . even your freedom.” The advertiser went on to say that its professionals reduce tax liabilities in amounts of “70, 80, even 90 percent of what’s owed.”
This is good marketing at one level: it creates anxious images and thoughts in the listeners’ minds and points them to relief. But the message is misleading.

IRS Won’t Arrest You For $10,000 Owing
Is it a “fact” that the IRS can put you in jail if you owe $10,000 or more? Not entirely. The IRS can prosecute you for tax crimes, the jury can convict you, and federal marshals will put you in jail. And there is no lower dollar limit to tax crimes. So yes, it’s possible to go to jail with only $10,000 owing. But tax crimes always involve some other behavior than merely owing taxes. You won’t go to jail just because you owe $10,000; you might go to jail because of how you came to owe $10,000, and what you did to avoid paying it.
The IRS doesn’t usually spend resources prosecuting crimes on such small liabilities. This doesn’t mean it can’t. It’s just very unlikely.
Similarly, the IRS isn’t about to take your car or house for owing $10,000. Those actions require a lot of bureaucratic review, and only occur as a last resort after the taxpayer refuses to speak to the IRS reasonably.

Percentage Of Tax Reduced Means Nothing
I’m sure the tax-resolution service touting the “70, 80, even 90 percent of what’s owed” gets results like that on occasion. The IRS will compromise your liability if you can show that you can’t pay it – that process is the Offer in Compromise. And comparing the original liability to the amount paid through the offer might result in a 90 percent reduction.
But the IRS doesn’t care how much liability is being written off. It cares how much you can pay. For instance, when I was at the IRS, I approved an Offer in Compromise that wrote off a $500 million tax debt in exchange for a $500 payment – more than a 99.99 percent reduction! Of course, that’s difficult to replicate: the taxpayer had been a president of a Savings and Loan in the 1980s, living large until the feds brought down his financial institution, and the government figured that collecting $500 from his nephew was preferable to keeping the assessment open until he died in jail.
People who listen to these ads call me to ask by what percentage I can reduce their tax, and I can’t answer. I need to study their financial situation before suggesting amounts. And that just doesn’t sound as gripping on a radio ad. But, please remember, if radio ad promises sound too good to be true for your particular situation, they probably are.

You file bankruptcy to get rid of debts you can’t afford to pay and to get the fresh financial start in life that you so desperately need. But remember … not all debts can be wiped out in your bankruptcy.

The Bankruptcy Code lists several types of debts that can’t be discharged in bankruptcy. These are things like:
•    Child support payments
•    Spousal support
•    Most student loans
•    Certain tax debts
•    Injuries caused by driving under the influence
•    Debts which are the subject of a divorce judgment

•    Civil penalties from government entities

Traffic tickets and parking tickets fall under the last category, “civil penalties.”

Chapter 7 Bankruptcy

523(a)(7) forbids the discharge of civil penalties or criminal fines. Therefore, in a Chapter 7 bankruptcy government fines aren’t wiped out.

Chapter 13 Bankruptcy

Ahhh … Good News! (Maybe).

Bankruptcy Code 1328(a)(3) allow a Chapter 13 debtor to discharge non-criminal government fines if he completes all the court approved plan payments.

What is included in these “civil penalties” or “civil infractions”? This can be minor offenses such as speeding, failing to stop at a stop sign, or parking tickets. These claims are places with the rest of the unsecured creditors in a Chapter 13 plan. They are paid over the next 3 to 5 years from what is affordable to the debtor. Whatever isn’t paid through the 3 to 5 years plan is discharged at the end.

One more practical pointer … Even if you have a criminal fine that isn’t wiped out by bankruptcy, you can include it in a Chapter 13 plan. This stops the creditor (which is usually the government) from collecting from you during the course of the Chapter 13 bankruptcy. And that means the State Government is stopped from taking your drivers license or sending you to jail for non-payment of this fine. Yes, at the completion of the 3 to 5 year Chapter 13 plan the balance due remains due and the State Government can then collect from you. But you are safe during the time the chapter 13 bankruptcy is in effect.

So …
•    If the fine is for a criminal action, it’s not wiped out in either a Chapter 7 or a Chapter 13 bankruptcy.
•    But if your fine is a civil penalty it’s not wiped out in a Chapter 7 bankruptcy, but it can be discharged in a Chapter 13 bankruptcy.
•    And even if can’t be discharged in either a Chapter 7 or a Chapter13 bankruptcy, you can get protection from revocation of drivers license or being sent to jail for non-payment while the Chapter 13 proceeds.

Credit: Stephen Brittain of Victorville

http://highdesertbankruptcycenter.com/

Why the FreeCreditReport.Com ads are a scam

When is FREE not FREE?

In a world seemingly driven in all matters by credit reports, getting that report for nothing ought to be a good thing,

But the commercial entities beat the federal government to the web address freecreditreport.com.

And they also got a better ad agency that wrote catchy tunes promoting their product, under the guise of free credit report.

But freecreditreport.com provides you a free credit report only if you surrender personal information, wait for it to come by snail-mail  and sign up for a monthly service billed to your credit card.

They bank on you not cancelling that subscription.

Cha ching!

It’s not really free.

There is a free credit report

The three big credit reporting agencies do provide a no-strings attached credit report to everyone, once a year.

Unfortunately, the URL doesn’t mention free, and doesn’t come with a catchy, banjo driven jingle;

Annualcreditreport.com

But it does provide simple, and free, access to your credit file.

The right to know

Federal law enacted in 2003 gives everyone the right to request a free credit report each year from each of the three national credit reporting agencies:  Experian, Equifax, and Transunion.

For nothing (that is: free) you can examine your credit report once every four months, if you request your free report sequentially from the CRA’s.

Repeat after me:  annualcreditreport.com.

What to do if you find errors

The Federal Trade Commission website walks you through how to challenge inaccurate information on your credit report.  They’ve even included a sample dispute letter.

ConsumerHelpCentral.com sorts out your remedies if the CRA doesn’t correct the information.

Sing the chorus

Here’s the game plan:

  • Click on www.annualcreditreport.com
  • Order a copy of your report from one agency
  • Look for errors and inaccuracies
  • Challenge bad information
  • Mark your calendar for 4 months to order a report from one of the other national CRA’s

 

 

 

Credit: Cathy Moran of Redwood City

http://www.bankruptcysoapbox.com/get-annual-credit-report/

Pigs Get Fat, and Hogs Get Slaughtered

That’s a great saying, and it applies well to pre-bankruptcy planning.  It is perfectly acceptable to move assets around before a bankruptcy, within reason.  It’s a little like the difference between tax avoidance and tax evasion: there are legal limits to avoiding taxes, and there are legal limits to avoiding your creditors.  Stay within those limits, and you’re being pretty smart.  Eric Busby, Houston bankruptcy lawyer, explains it a bit more.