The SBA is sending out e-mails that seem to indicate that even though the signature block for the borrower is a corporate entity or LLC, the individual signing is also somehow liable in a personal capacity. But they also confirm that loans up to $200,000 require no personal guaranty. The language is as follows:
Personal Guaranty:
$0 – $200,000: No personal guaranty required
The Federal Reserve is meeting today and widely expected to start to reduce interest rates. I last heard that there was a 55% likelihood for a .50 cut. Frankly, I’d expect a .25 cut. But if they want to reach a goal of 100 basis points cut by year end, they almost have to do a .50 cut today.
So one big question: how much and how quickly will that trickle down to ordinary consumer debt?
A lot of people would like to avoid bankruptcy. I get it. The Wall Street Journal published an article yesterday that while consumer credit debt is up 11% over last year, other sources of credit are drying up and no reasonable alternatives exist.
This month, lots of debt collectors are filing cases. You may have been served recently. First, don’t ignore it. If you ignore a summons, it’s easy for the debt collector to get a judgment and start to garnish your wages or bank accounts. Don’t do it. We call that “low hanging fruit”. They like when you default. It’s an automatic win for them.
There are many possible defenses. Perhaps their paperwork is bad. Perhaps they tried to collect too aggressively and violated our consumer laws. Maybe they waited too long to sue and the statute of limitations ran. Something. Anything.
You can also settle. A settlement before they win. After they win, they no longer want to settle on terms that you may find attractive.
Let’s say you have negotiated a settlement with a creditor. What should you include to help ensure that your credit is the best it can be?
First, under the Fair Credit Reporting Act (the “FCRA”), a creditor is not required to report anything, but what it does choose to report, must be accurate.
So this leaves the door open to ask for a trade line deletion. This means that the account won’t show up at all – no late pays, no delinquencies, and no language such as “settled for less than owed”. This is the best outcome, particularly if you have other accounts elsewhere with a positive history. Many original creditors won’t agree to this but if you can point to some kind of error on their part, you’ll be more successful in having the trade line deleted.
We’ve been getting more questions lately from folks who have taken out U.S. loans (both federal and private) but now may live or work overseas. Saudia Arabia today, someone from Turkey last week. We can certainly advise these borrowers what action they can take under the new Public Service rules, discuss collection limitations, statutes of limitations etc. We welcome your calls, just set a consult with us.
There are so many things that set us apart and in my opinion make us one of the best law firms in the Tampa Bay area that you can choose to file your bankruptcy. Whoever you are looking to hire to file a Chapter 7 or Chapter 13 bankruptcy, you should ask these questions:
Wells Fargo has always been difficult to work with when we try to negotiate private student loan settlements. However, we’ve started to see better deals in the past two weeks from other private student loan servicers – so I believe Wells Fargo loans are now fair game.
Well Fargo is exiting the student loan business. In a recent Bizjournal article “Wells Fargo sells off private student loan business,” nearly $10 billion of student loans were transferred to Apollo Global Management, Inc. and Blackstone Group, Inc. While it’ll be a few weeks, we expect this changing of the guard will open the doors for reasonable settlement opportunities. Something we haven’t been seeing for most all of Wells Fargo loans.
What we’re telling our clients now is this: don’t wait until the moratoriums are over. Now is the time to get good deals. In a few months time, after the moratoriums are lifted, creditor attorneys will back at it. Filing lawsuits. Garnishing wages. Repossessions. When they have the power to do those things, they will raise their settlement demands. Their clients are bleeding money right now. Now is the time to settle your debt — whether it be credit card, deficiency judgments, private student loans, car loans, you name it. In 6-12 months, the economic landscape will be better, and these deals we see now, won’t be there any longer.
My first consult this week was for a former client who just learned of a bank garnishment of his joint bank account with his wife from an old Cach final judgment that he thought was vacated and dismissed. The entire account was frozen. Plus his wife’s next check couldn’t be stopped from being deposited and taken.
How did he learn of this? When he was at the grocery store to buy food for his family in the midst of the COVID-19 crisis. After carefully avoiding everyone and loading his cart with what he could find – he walked away with nothing. He didn’t have money to pay us, but since we had been compassionate to him in the past, he thought, why not contact us, perhaps there is something we could do.
Fortunately, we were able to secure with the opposing attorney, a dissolution of the writ of garnishment and all the money in his joint bank account will be released in just a day or two. In the meantime, our client has borrowed some funds from a neighbor. This could happen to anyone — this client had no idea that this old judgment was out there, and that bank account was his emergency fund. He lost his job in Europe and had no credit cards. His wife works at a local Tampa Bay retailer and just had her hours cut. I sincerely appreciate opposing counsel who timely communicated with me in this urgent matter to get it resolved now and without the necessity of a court hearing, which could take a few weeks!
Which is the better option?
Debt management plans have no guarantee that the creditor will accept a negotiated discount. Debt consolidators charge a fee regardless of whether a settlement is reached and often years go by with credit scores dwindling each month. It’s often better to reach a deal with the creditor directly then try to include them in a debt consolidation plan. Lump sums are needed. 1099s are sent for any forgiven amounts leading to a tax bill. Any negotiated agreement must be in writing preferably with a line item deletion with the credit reporting agencies or at least reflecting the debt as paid in full.
Bankruptcy, particularly a Chapter 7, is often much faster — only three months for a Chapter 7 discharge. While a Chapter 7 will remain on someone’s credit for 10 years, most people are able to get their credit score back up to high 600s or low 700s within six months to two years. Bankruptcy is a legal mechanism intended to let people start fresh and credit rebuilding takes much less time than most people think.
It’s more difficult for a creditor, including the government for federal student loans, to garnish income from someone who is self-employed — but it can be done. Once the creditor is aware that someone is self-employed, they can have a second order entered to go after non-earnings paid to the debtor. If a debtor runs his or her income through their own LLC, this can always be worked around with a second order directed toward the LLC, and then a regular wage garnishment if they are an employee, or a non-earnings order if they are an independent contractor.
The good news for someone faced with this, is that it will take time for the creditor to figure out how to reach this income – this is time that a settlement can be reached with a private creditor or a federal loan can be rehabbed to cure any default. Bankruptcy should also be considered. The bad news is if you continue to ignore it, the garnishment once it finally goes through is not limited to 15-25% of your wages, but now they can take 100%. So like many things legal, ignore a garnishment order at your own peril – even if you are self-employed.
Non-Earnings Garnishment Orders
Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog