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:
- What kind of lawyer and staff turnover do you have? (our bankruptcy paralegal and attorney have been with us for five plus years – nearly ten in fact – it helps to speak with the same person as your case progresses, who knows you and your situation)
- Can you help me with my student loans (this is where we really stand out — we own student loans – every day, we are reducing or outright eliminating student loan debt in one form or another)
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
How much is too much? Unfortunately, the Fair Debt Collection Practices Act and its Florida counterpart do not specify a particular number of calls per day that a creditor can make when trying to collect a debt.
An older Florida case is somewhat illustrative in finding the answer. In Story v. J.M. Fields, Inc., 343 So. 2d 675, 677 (Fla. 1st DCA 1977), the Court looked at what conduct was considered harassing, such as: a) the frequency of the creditor’s calls; b) the number of calls; c) the time of day when calls were received (whether during normal business hours); and d) whether the purpose of the calls was appropriate, such as calling to i) remind the debtor of the debt; ii) determine the reasons for non-payment; iii) discuss a plan for making payments.
My rule of thumb that I like to use is if a creditor calls in the morning and talks with you, and then calls again the same day, that only works if you said something like I may get paid at lunchtime and might have some money for you. Otherwise, I doubt that anything changed that day and there was no reasonable reason for a second call the same day other than to harass you.
Useful information can be obtained from the Consent Orders relating to improper debt collection activities obtained by the Consumer Financial Protection Bureau. Recent orders applicable to Fred Hanna, Encore Capital Group, Inc., Midland Funding, LLC, Midland Credit Management, Inc., Asset Acceptance Capital Corp., PRA, LLC, Porfolio Recovery Associates, Chase Bankcard Services, Santander Bank, N.A., Solomon & Solomon P.C., Westlake and Wilshire etc. can be found here on the CFPB site. (searchable filters).
Debt collectors are not permitted to provide false or deceptive information to you in their attempts to collect a debt. This may include the things they can do to you if you do not pay (such as take your home, sue you etc.). This may include who they are affiliated with. We are evaluating a case right now where the debt collector is private company. But they’ve told my client that they are the Department of Education. This is contrary to their website which we noted states no affiliation with the DOE. Basically, our marching orders are if what they say is not the whole truth and nothing but the truth, they run the risk of violating the law. This means if they try to explain your options, but leave perhaps the best one out – this would be a violation of the FDCPA, FCCPA and perhaps even unlicensed practice of law. All these consumer law violations give us excellent leverage to negotiate lower balances, better payment plans and sometimes even a write off of the entire debt.
This applies to all consumer debt. Auto finance, second mortgages, credit cards, signature loans and best of all student loan debt. When we are hired to settle any kind of debt we first take the time to educate our client on their consumer rights, what kinds of behavior can lead to violations and we have them document any phone calls they are receiving. Then we use all this to settle the debt.
If a creditor waits too long to sue, the creditor can be barred from ever bringing suit. The purpose of having a statute of limitations is so that lawsuits are brought when the matter is still fresh: before documents are destroyed and memories fade. If they can no longer bring a lawsuit, then there is no way to legally enforce the debt. Each state has their own laws as to how long the statute of limitations is and it varies tremendously by state and also by the type of action. In Florida, the statute lasts five years for a written contract and four years for a credit card account. While this seems simple, it is often amazingly difficult for a lay person to analyze because a contract may provide that a different state law applies, even a state that neither party has anything to do with. The answer may also vary depending upon whether it is a procedural or substantive question of law or how complete the writing was. The Florida Statute of Limitations on this is contained in Section 95.11:
Actions other than for recovery of real property shall be commenced as follows:
(2) Within five years.–