Can a debt collector call your friends and family?

Andre is a 30-year old who works in sales for a medical device company. Although he makes a decent living now, he struggled financially in his 20s and has a few debts in collections due to his over-reliance on credit cards after college.

Andre has been dating Stephanie for nearly a year now and they’ve recently talked about moving in together. Andre hasn’t figured out yet how to tell Stephanie about his credit card debt.

One night, Stephanie mentions that she’s been getting a bunch of calls from an unknown number for the last few weeks. Stephanie never answered any of the calls and the caller never left a voicemail. Until today. Curious who’s been calling her over and over, Stephanie finally answered the phone. Turns out, it was a debt collector who told Stephanie he was trying to get in touch with Andre about an unpaid credit card bill.

When Stephanie told Andre this, he was humiliated. Although she says that she understands, Andre thinks that she’s having second thoughts about moving in with him.

Were the collector’s repeated calls to Stephanie illegal?

The Fair Debt Collection Practices Act forbids a debt collector from communicating with your friends and family. In fact, collection communications to most third-parties are illegal.

The key to understanding the extent to this rule, though, is the word “communicate.” The law defines “communicate” as the conveying of information about a debt. So, for example, a missed call with no voicemail probably is not a “communication” because no information about a debt was conveyed.

Therefore, the collection calls that Stephanie didn't answer weren't illegal because the collector didn't "communicate" anything about a debt. But the call that Stephanie picked up where the collector told her about Andre's debt was an illegal communication with a third party.

Communications with certain third parties are allowed

There are a few exceptions to the general rule, though. A collector is allowed to communicate with a couple of people without breaking the law, including:

  • your spouse

  • your attorney

  • the debt collector's attorney

  • the creditor (ie. the debt collector's client)

  • the creditor's attorney

  • a credit reporting agency (ie. Equifax, Experian, TransUnion, etc);

A collector may also communicate with your employer if it's necessary to enforce a court judgment. For example, a debt collector who has a judgment against someone and wants to garnish his wages can call that person’s employer to confirm that he works there.

A collector may also communicate with a third-party to learn your contact information

Another exception to the general rule against third-party communications is the "location information" exception. The law allows debt collectors to call friends or family to learn your address and phone number. But this call is strictly regulated:

  • the collector must identify himself and tell your friend that he is confirming your location information;

  • the collector can't identify his employer unless your friend asks;

  • the collector can't tell your friend that you owe a debt or discuss the details of the debt;

  • in most cases, the collector can't ask your friend to have you call the collector back;

  • in most cases, the collector only gets to make this "location information" call one time

Understand, however, that if the collector already knows your address and phone number, then it has no need to call a third party to get your location information.

HOW TO USE THE FDCPA TO STOP ILLEGAL COLLECTION CALLS TO third parties

The FDCPA allows you to sue a debt collector who violates the law. It's a great way to stop illegal collection calls to you friends and family and to hold the debt collector accountable for its conduct. Under the FDCPA, a successful claim gets you:

  • Up to $1,000 in statutory damages (even if you've suffered no monetary loss);

  • Provable actual damages (including for emotional distress);

  • Your attorney fees and court costs must be paid by the collector

Most consumer lawyers handle FDCPA lawsuits on a contingency fee. This means that you don't pay any fees unless your attorney recovers money for you and those fees come from the collector's pocket, not yours. Congress wrote the FDCPA this way to incentivize people to enforce the FDCPA and help the government regulate debt collectors and ensure compliance with the law.

Did a debt collector illegally call someone that you know? Get a free consult now.

Emergency bankruptcy in Minnesota

What is emergency bankruptcy? 

An emergency bankruptcy filing is a way to stop impending collection action, like a garnishment, foreclosure sale, lawsuit or tax lien. Once the emergency case is filed, no collectors can take any action against you. And if they do anyway, we can sue them, or undo the action (at the very least). To file an emergency bankruptcy, we don't need to file as much information as we would in a full bankruptcy. The emergency filing gives us14 days to file all the remaining bankruptcy documents.

How long does emergency bankruptcy take? 

We can file an emergency case in a day or two, if it's necessary. We've even filed them the same day as the initial client meeting. But keep in mind that the closer we are to the emergency, the better chance we wouldn't be able to file it in time. Also, rush bankruptcy cases cost more than standard cases.

How to get ready

Document collection might be the hardest part of bankruptcy. The one thing that you need before filing an emergency case is a list of your creditors. As far as the full bankruptcy goes, there are a couple of things here that might be tricky. For example, you'll need to have filed your most recent taxes before filing bankruptcy (your last four years of tax returns need to be filed for a Chapter 13). Self-employed bankruptcy filers need to provide a profit & loss. The more complicated the case, the harder you'll have to work to make sure everything is filed in time. You should make sure to have these things before filing bankruptcy.

Also, you'll have to do your online credit counseling before an emergency filing. There's no room for mistakes on this one. If your online credit counseling is not completed before a bankruptcy, the case will be dismissed. Talk to your attorney about how to get the case completed on a rush basis.

The 14 day deadline

If you can't complete the full bankruptcy within 14 days of filing an emergency case, the case will be dismissed automatically by the court. On the one hand, this still achieved the desired effect—the bankruptcy still stopped the collection temporarily, which would have bought you some time. But on the other hand, it also could make it harder to re-file (the court can be a bit stricter with people who file multiple times).

If you need an emergency bankruptcy, get in touch with an attorney right away. But make sure to leave plenty of time!

Conditional delivery: how car dealers use it to scam buyers

If you've ever bought a vehicle from a dealer and financed the purchase, chances are you signed something called a conditional delivery agreement. If you read this agreement carefully, it states that the dealer has the right to cancel the sale if the dealer can't assign your auto loan to a lender on terms agreeable to the dealer. In other words, if the dealer changes its mind about the deal, it has the right to unwind the transaction. This provision, typically in the fine print of the sales contract, is the source of one of the most widespread auto frauds and applies to both new and used car sales. Here's how the scam works: you agree to buy a vehicle and you fill out a credit application for financing. The dealer tells you that you've been approved for the loan and you sign the loan agreement and other typical sales paperwork, which contains the conditional delivery language. You either don't notice this provision because it's in the fine print or the dealer tells you it's nothing to worry about. So you give them a cash down payment and turn over your trade-in. The dealer gives you the keys to your new car and you drive it home thinking you're all set.

But you're not. A few days later, the dealer calls you and tells you that your financing "fell through" and that you need to bring the vehicle back and sign a new loan agreement. If you complain, they might threaten to repossess your new vehicle or even to call the police and report it stolen. So you go back to the dealership. And you learn that your trade-in has already been sold and that the new loan that they're demanding that you sign has a higher interest rate than the one you originally agreed to. Although you don't want to sign this new agreement, you don't have a choice because your trade-in is gone and they've threatened to repossess your new vehicle and keep your downpayment if you don't agree to the new, less favorable, loan on the spot. You need the new vehicle to get to work and to drive your kids to their activities, so you reluctantly sign the unfavorable new loan.

Dealers call this practice conditional delivery or spot delivery. Consumer advocates call it a "yo-yo" scam. Either way, it's a blatantly unfair and one-sided practice. The dealer doesn't want you to think about the deal overnight, it wants the deal closed on the spot. On the other hand, the dealer wants to keep its options open after you've driven the car off the lot. It doesn't want to be rushed into a hasty deal. The conditional delivery agreement makes the deal final for the buyer, but not for the seller.

Sometimes the yo-yo scam is simply the dealer re-thinking the terms of the sale after the fact. Other times, it's a deliberate scheme from the beginning to inflate the finance costs. There's evidence that dealers target customers with poor credit or low income. In other words, dealers use the yo-yo scam to rip off people who can least afford to be ripped off.

Although the conditional delivery provision in the contract gives the dealer some legal cover, there are ways to attack this unfair practice through a lawsuit. If you've been a victim of a yo-yo scam, you should discuss the situation with an attorney right away.

Mechanical problems after buying a vehicle? What you need to know.

used car (as-is, no warranty): probably no legal protections

Minnesota law makes it challenging to bring a case for mechanical issues on used cars that were sold as is. The only clear-cut way to defeat as-is would be if the dealer provided you with a warranty or service contract. The warranty, though, likely has to be the dealer’s warranty, not a warranty through a third party.

Another possible way around “as-is” is when the dealer lies about a vehicle’s condition. But this type of case may not require a dealer to pay the buyer’s attorney fees, so you have to do a cost-benefit analysis before paying an attorney to handle the case.

The law is stronger if you vehicle has an undisclosed prior accident, flood, or odometer rollback, but mechanical issues on as-is vehicles can be difficult to do anything about.

used car (with warranty): federal law protects you

The Magnuson-Moss Warranty Act is a federal law that provides a legal claim against anyone who fails to honor their obligations under a written warranty--even if the vehicle was bought used. The MMWA only applies to consumer goods, which are goods that are normally used for personal, family, or household purposes. The MMWA gives buyers a legal claim for damages against anyone who doesn't honor their obligations under a written warranty or vehicle service contract. The Act also requires the warrantor to pay the buyer's attorney fees and costs if the buyer brings a successful case.

To bring a viable case under the Act, you will likely need to have a mechanic inspect your vehicle and be willing to testify that the problems should be covered by your warranty.

New car — Minnesota’s lemon law protects you

Most people use the term "lemon" to describe any vehicle that has repeated problems. But in Minnesota the "lemon law” is a statute that protects buyers of new vehicles that have problems that are covered by a warranty and that can't be fixed.

There are six basic elements to a lemon law claim in Minnesota:

  • (1) The defect has to be covered by the manufacturer's warranty.

  • (2) The defect has to arise and be reported to the manufacturer or authorized dealer within two years of the date of purchase or within the term of the manufacturer's warranty, whichever date is earlier. Although there are certain circumstances where this time period can be extended, in general, the lemon law doesn't protect you against problems that crop up after two years.

  • (3) You have to give the manufacturer a reasonable opportunity to fix the defect. If you've given the manufacturer four or more opportunities to fix the same problem, or if they've had your vehicle for 30 or more days, the law presumes that they have had a reasonable opportunity to fix the issue. On one of these attempts, you have to give the manufacturer written notice of the problems. Also, if the problem affects the steering or braking systems, you may only have to allow one repair attempt.

  • (4) The defect has to still be present after the manufacturer has had a reasonable opportunity to fix it. In Minnesota, at least, the court is going to want to know whether there is still a problem.

  • (5) The problem has to substantially impair the use or value of the vehicle. This is a subjective test that is fact-specific and is usually decided on a case-by-case basis.

  • (6) The defect can't be caused by your negligence or misuse of the vehicle. You can't abuse or neglect your vehicle and then blame the manufacturer for not being able to fix it.

Before starting a lawsuit under Minnesota's lemon law, you have to engage in an Alternative Dispute Resolution process if the manufacturer offers one. The manufacturer of your vehicle will be able to give you information about their informal dispute process. This ADR process is not binding, though, and you can bring a lawsuit in court if you believe the ADR result is unjust.

If you bring a successful lemon law claim, you have the choice of a refund or replacement. The refund has to include the full purchase price of the vehicle, although there may be an offset for the mileage you've driven the vehicle. If you elect a replacement vehicle, it has to be one of comparable to the one you're returning. In addition, the manufacturer has to pay for your attorney fees and costs for bringing the lawsuit.

Stop collection calls for someone else's debt

On of the most frequent consumer complaints received by the Consumer Financial Protection Bureau are annoying collection calls for someone else. It's unclear whether these collectors are intentionally pursuing the wrong person or that they've made a mistake. But if you're getting calls or letters from a collector for someone else's debt, you probably don't care why it's happening, you just want the collection attempts to stop. Here are some suggestions to stop collection calls for someone else.

Collection calls for someone else

If a debt collector is calling or writing you about a debt that you don't owe, the first thing you should do is tell them very clearly that they have the wrong person and that this is someone else's debt. Be polite but firm. The collector may ask you to confirm the last four digits of your social security number or a similar personal identifier. While it may be unwise to give the collector your full social security number, there probably isn't too much risk in giving them  the last four digits to confirm that the debt isn't yours. The collector may ask you if you know the actual account-holder and how to reach them. While you're under no obligation to do so, you may consider passing along the other person's information if you know it.

In addition to verbally telling the collector that it is someone else's debt, you may consider sending a follow-up letter confirming what you told them. Identify yourself in the letter and then write something like: "you called me on this date at this number. I am not the person who owes this debt. Please stop contacting me." If you know any details about the account in question, include a reference to those in your letter to be sure the collector can properly identify the account. Send this letter certified mail with a return receipt and keep a copy of the letter and receipt for your records.

You should also keep detailed records of any additional collection attempts after you've notified the collector that the debt isn't yours. Keep track of the time, dates, and duration of any additional calls and save any voice messages. If you think the calls are robocalls, make a note of that and why you think so. Also, keep copies of any letters or other documents that they send you.

It's also a good idea to check your credit reports to make sure the other person's debt isn't listed on your reports. Use Annual Credit Report to get free copies of your credit reports from the three major credit reporting agencies. Once you have the reports, make sure that the other person's account isn't showing up on your credit report. If it is, you should send a dispute letter to each of the credit bureaus incorrectly reporting that account. Take a look at this post for more information about how to dispute incorrect information on your credit report.

If you've told the debt collector that you are not the right person and continue to get collection calls for someone else, it's time to talk to a consumer rights attorney to discuss the situation in more detail. In addition to helping you stop the collection attempts, a consumer attorney can advise you whether you have any claims under the Fair Debt Collection Practices Act against the debt collector. If the debt doesn't belong to you, you've told the collector that, and the collector still keeps calling, it deserves to get sued under the FDCPA and be held accountable for harassing an innocent consumer.

Collection lawsuit for a debt that isn't yours

If you get served with a collection lawsuit for someone else's debt, you need to take additional steps. You should do everything suggested above, but you also have to submit an answer to the lawsuit. In Minnesota, the answer must be submitted within 20 days. An answer is a formal legal document that responds to each of the allegations in the complaint. If the debt isn't yours, you should be able to deny most of the allegations in the lawsuit. You should also note somewhere in your answer that the debt is someone else's. Even if you don't owe the debt, you have to answer the lawsuit. Failure to respond to the lawsuit will likely result in a default judgment against you. A default judgment can be difficult (and expensive) to overturn, even if the debt isn't yours. It may also lead to garnishments and other unpleasantness.

Because the consequences of a collection lawsuit are quite serious, you should strongly consider discussing your situation with a consumer lawyer. A consumer lawyer can help you prepare an answer to the lawsuit and also advise you if you have possible counterclaims against the debt collector for pursuing the wrong person.

Use the TCPA to stop wrong number robocalls

Unwanted robocalls and texts are one of the most frequent consumer complaints received by the Federal Communications Commission. In 2014 alone, the FCC received about 215,000 complaints about autodialer calls and texts. These calls are particularly annoying when the caller is trying to reach someone else. Often, these wrong number robocalls are from debt collectors trying to collect a debt from the previous user of a phone number or from telemarketers pushing their products. In response to the overwhelming number of consumer complaints, the FCC recently strengthened consumer protections against wrong number robocalls by clarifying the Telephone Consumer Protection Act. The TCPA is a federal law that prohibits auto-dialed calls to your cellular phone without your consent. Until recently, however, there was a loophole of sorts for wrong number robocalls. Callers could argue that they had the consent of the person they were trying to reach and that was good enough to satisfy the TCPA's consent requirement.

Thankfully, the FCC closed this loophole. The FCC has made clear that callers are liable for robocalls to reassigned numbers when the current subscriber of the number has not consented, even if the caller has no notice of the reassignment. This reaffirms the TCPA's basic premise of giving consumers control over the calls that they receive.

Under the TCPA, you can obtain an order from a court that requires the caller to stop placing wrong number robocalls to your cell phone. In addition, the TCPA provides for damages of at least $500 per illegal robocall. This $500/call penalty is designed to deter illegal robocalls and to incentivize consumers to help the FCC enforce the TCPA through private lawsuits.

When Buying a Used Car, Watch Out for Worthless Service Contracts

Buy a new or used car these days and you can expect the salesperson to pressure you to buy a service contract or "extended warranty." For a fee, which is usually rolled into the financing, these products provide repairs or maintenance for a certain period of time, say 2 years or 24,000 miles. But they rarely provide much benefit to the buyer and often only serve to pad the dealer's bottom line.

Here's an example of what I mean. In a recent case, our client bought a used vehicle with over 100,000 miles on it. The client also bought a service contract for an additional $2,500 or so. The service contract lasted for 5 years or an additional 100,000 miles. Our client rolled the cost of the service contract into his loan for about $50 a month. At this point, you might be thinking this sounds like a pretty good deal.

However, the fine print of the service contract provided for a maximum reimbursement of only $3,000, less a $100 deductible. So the maximum reimbursement was actually $2,900. Further, a great deal of possible mechanical problems were excluded from coverage.

 So, our client paid $2,500 for the right to be reimbursed $2,900. In other words, he paid $2,500 to potentially receive an additional $400, but only if: (a) a problem occurred; (b) the problem occurred during the term of the service contact and (c) the problem wasn't excluded from coverage. He would have been better of declining the service contract and putting the $50 a month into a savings account. The savings account could have been used for any repair at any time. And if no repairs are necessary, he could have used the money for something else.

Before agreeing to buy any service contract, make sure you understand the total cost (not just the monthly cost), the total amount of coverage, and what is covered and what's not. Don't rely on the salesperson to tell you these things, read the terms for yourself. And if you don't understand the terms, it probably doesn't make sense to buy it.

Bankruptcy trustees are "clawing back" tuition paid for debtors' kids

According to an article in the Wall Street Journal, Bankruptcy Trustees are using a legal argument called "fraudulent transfer" to take back tuition payments clients have made to their children's colleges. This can be a shock to people, but trustees do things like this all the time. Here's how it works:

Under bankruptcy law, all the property you have at the time of your bankruptcy filing is part of the bankruptcy estate. If you have property above certain exemption amounts, the trustee can demand turnover of that property. This would seem to incentivize people to get rid of assets before filing bankruptcy. You can understand the temptation for someone to sell their boat to their brother for $1.00.

Bankruptcy law has a way of dealing with this problem, called fraudulent transfer law. A fraudulent transfer in Minnesota can occur when someone gives away property for less than "equivalent value." This allows the trustee to "claw back" the property and distribute it equitably to all the creditors.

But is college tuition a fraudulent transfer? The trustee's theory is that if you were paying for college tuition for yourself, it wouldn't be a fraudulent transfer because you received equivalent value for the transfer. But when you pay tuition for your adult children, (which you're not legally obligated to do) you don't receive anything in return (other than children who are less likely to need your support in the future). In that way, it's like a gift, and can be pursued as a fraudulent transfer.

So if the trustee claws back the tuition, kids have a problem. The school will want its tuition, and may hold back transcripts or diplomas, or prevent registration for the next semester, until they're paid up. So this is a scenario bankruptcy filers really want to avoid.

There might be some defenses. For example, if the property would have been exempt anyway, it might not be a fraudulent transfer. But this issue hasn't been directly addressed by binding caselaw in Minnesota, and so it's no sure thing. To brainstorm other solutions to this problem, get in touch.

5 Tips for Streamlining Your Bankruptcy

The number one thing that slows down a bankruptcy case is the speed with which clients can assemble the necessary documents. By following these five tips, you can ensure that your bankruptcy moves quickly, and that you're prepared for any issues that could arise during the process.

Go Paperless

It’s time to get rid of that mountain of paperwork and bills. Sign up to receive digital statements from your bank and financial accounts, and request to receive your pays stubs digitally. It also pays to switch your utilities, mortgage, car payments and regular payments to e-bills. This allows you to stay up to date on your assets and liabilities, and makes submitting your documents to your attorney as easy as sending an email.

Track your spending

Whether or not you are planning on filing bankruptcy, it’s good practice to keep track of where your money goes each month. How much do you spend on groceries? Entertainment? How about your pets? Often, its more than our clients realize. We recommend apps like ‘Mint’ or ‘You Need a Budget’ to keep track of your expenses. This info can go straight into your bankruptcy petition and will ensure a high level of accuracy.

Separate your business and personal accounts

Many of our clients are business owners. Whether you manage your own company or sell crafts on weekends, you need to track your company’s profit and loss. It’s not only bad business to conflate your personal and professional expenses and funds – it can also get lead to you getting audited by the court after you file your bankruptcy.

Organize Your Important Documents …

Designate one spot for your important documents. It can be anything from a drawer to a folder to a safe. Whatever it is, only put important documents in it. Car titles, your social security card, birth certificates, your insurance policies and court documents are all great things to keep together. Keep things like bills, statements, and mail separate from this.

…and Shred the Unimportant Ones.

People are often afraid to throw away anything that looks ‘official’. People end up with piles of bills, collection letters, and spam mail, along with a whole lot of anxiety. Shred anything that is outdated, useless, or irrelevant. There is no reason to hold on to more than one copy of the same bill. Only keep the most recently dated one. By getting rid of excess, a seemingly enormous pile can be quickly whittled down to only the necessary things. Also, if you have already switched to paperless statements, your past statements will be readily accessible, so there is doubly a reason to hold onto them.

Divorce debts in Chapter 13 bankruptcy

In another post, we wrote about how to deal with divorce debts in Chapter 7 Bankruptcy. Chapter 13 has different rules and different ways to deal with family court debts.

Some Family Court debts can be wiped out in Chapter 13

Chapter 13 can't discharge “domestic support obligations”. Domestic support obligations (child support/maintenance) can't be wiped out in any form of bankruptcy, Chapter 7 or 13. In Chapter 13, to get a discharge the debtor must pay all child support/maintenance arrears, as well as all payments due during the three to five years of the Chapter 13 plan.

But Chapter 13 can wipe out other debts created by a divorce decree. Debts created by a divorce decree that don't count as domestic support obligations (e.g. property settlements, equalizers, or promises to pay joint marital debts) can be wiped out in Chapter 13 bankruptcy. These debts aren't always wiped out in a Chapter 7, so for people with large debts like this, Chapter 13 can be a much better choice.

Spreading family court debt out over time

Child support and maintenance arrears can be spread out over five years in Chapter 13. If you're behind on child support and maintenance, Chapter 13 gives you the ability to put those arrears into a Chapter 13 payment plan. This wouldn't relieve you from your obligation to pay child support or maintenance payments that come due after the bankruptcy is filed, but if you're facing garnishment or other collection, it can buy you breathing room to pay arrears over time. This may also reduce the amount you're required to pay your other, unsecured creditors.

As discussed above, Chapter 13 has many advantages over Chapter 7 when it comes to dealing with divorce debts. If you have questions about how to deal with your family law debts in bankruptcy, get in touch.

Divorce debts in Chapter 7 bankruptcy

Divorce is one of the leading causes of bankruptcy. People often have questions about how to deal with debts from their divorce. Depending on how a debt is categorized in the divorce decree, you might be able to wipe it out in bankruptcy, or it might stick around.

1. Child support and maintenance cannot be discharged in Chapter 7 bankruptcy. Certain debts in bankruptcy are called "domestic support obligations," including child support and spousal maintenance/alimony. These debts can never be discharged in bankruptcy, and are also "priority" debts, meaning that if the trustee gets any money from you, those debts are paid off first.

2. Debts incurred in a divorce cannot be discharged in Chapter 7 bankruptcy (although they can be in Chapter 13). Any other debt created by a divorce cannot be discharged in Chapter 7. This includes property settlements or "equalizers." Also, certain obligations by one spouse to pay marital debts can be considered non-dischargeable. To figure this out, you'll want to look for "hold harmless" language in your decree, which describes what obligations won't be discharged.

3. Some divorce lawyer fees are dischargeable in Chapter 7, some are not. If you owe fees to your divorce lawyer when you file bankruptcy, that debt is wiped out in bankruptcy. You may be ordered to pay your ex-spouse's attorney's fees by the court, and that debt might be non-dischargeable in bankruptcy because you're paying attorney's fees to "support" the ex-spouse.

4. Family lawyers should pay attention to the wording they use in divorce decrees. As described above, words matter in a divorce decree. Depending on how a debt is described, it might be dischargeable or non-dischargeable in bankruptcy. Make sure your lawyer is thinking about these issues when going through a divorce with a significant amount of debt.

I forgot to add a creditor to my bankruptcy

As hard as we try to find all of your creditors before a bankruptcy, every once in a while one slips through the cracks. What happens when a creditor gets left out?

1. First of all, don't get any ideas. All creditors are "included" in bankruptcy. You can't leave one out, purposely or accidentally. So there's no point in "forgetting" to list a creditor, for example, in hopes that you can keep a credit card open. And remember, you sign your bankruptcy under penalty of perjury, so it's illegal to leave any information out of your bankruptcy papers. And as your attorney, I know better and won't let it happen. So don't try.

2. In a no-asset Chapter 7 case, all debts are discharged whether listed or not. If a debt is dischargeable, then it's wiped out in a typical Chapter 7 bankruptcy whether it's listed or not (as long as it wasn't left out intentionally.) Typically when a creditor has come out of the woodwork after a Chapter 7, we just send them a letter notifying the of the bankruptcy, and that's enough to protect you. After that, any attempts to collect the debt would be illegal.

3. In a Chapter 7 cases with assets, debts may not be discharged unless listed. Unlike a no-asset case, in which a creditor generally has nothing to gain from being listed in the bankruptcy, in a case where assets are going to be distributed to creditors, it does harm the creditor to be unlisted. Section 523(a)(3) of the Bankruptcy Code makes a debt like this non-dischargeable if it wasn't listed in the bankruptcy.

4. In a Chapter 13 case, a creditor must at least be added before the case is finished. In a Chapter 13 case, a creditor must have been listed in the plan to be discharged.  So if you've forgotten to add a creditor, and you're already in your Chapter 13 plan, it's probably wise to go back and add the creditor. This is probably fixable, since Section 523(a)(3) doesn't apply to Chapter 13.

Same-sex married couples can file bankruptcy together

We wrote about the evolving status of same-sex couples in bankruptcy here and here. Now that the Supreme Court has struck down the Defense of Marriage Act, the federal government must recognize same-sex marriages valid in the state in which they were performed. Although this specific issue hasn't come to bankruptcy court, it's clear that the bankruptcy system will have to follow the Supreme Court's ruling and allow same-sex married couples to file joint bankruptcy cases.

1. Anyone legally married in Minnesota can file bankruptcy together in Minnesota. Any married couple can file a joint bankruptcy case if their bankruptcy was legally performed in Minnesota. This includes same-sex couples whose weddings were performed on or after August 1, 2013.

2. Anyone legally married in another state can file bankruptcy together in Minnesota. Any couple married in Iowa, New York, or any of the other 11 states allowing same-sex marriage can file a joint bankruptcy. It's not clear how a Canadian marriage, for example, would shake out in U.S. bankruptcy court, but I'm sure this is something we'll learn soon.

3. Anyone who's legally married in any of these states can file bankruptcy together anywhere in the U.S. The full faith and credit clause of the Constitution basically says that a public act (such as marriage) valid in one state is also valid in any other state. This means that any same-sex couple married in any of the 13 states allowing same-sex marriage can file a joint bankruptcy anywhere in the U.S.

4. Filing a joint bankruptcy has benefits. Most attorneys will price a joint case lower than two individual cases. Instead of paying two attorney's fees, a same-sex married couple can now pay one. The same thing goes with for the court's filing fee. Plus it's much easier to provide an attorney one set of information, rather than having to handle each case separately. This is a BIG deal.

Watch out for fraudulent transfers in bankruptcy

A fraudulent transfer is a transfer of property before filing bankruptcy that may get you in trouble. If you've given away or sold any property in the six years before filing a bankruptcy case. you might be on the hook after your bankruptcy.

1. When you're actively trying to screw your creditors. An actual fraudulent transfer is where the bankruptcy debtor transfers property actually intending to evade his creditors. So for example, a bankruptcy filer gives away a car to her nephew three months before filing bankruptcy because she doesn't want her creditors to be able to seize it. That may be a fraudulent transfer. And the bankruptcy trustee can go after the bankruptcy filer and her nephew to get back the car (or the cash value of it.) An actual fraudulent transfer can also result in the bankruptcy discharge being taken away.

2. When you're not trying to screw your creditors, but do it anyway. A constructive fraudulent transfer is where the bankruptcy debtor gives away property and doesn't get fair value for it. So the bankruptcy filer isn't trying to evade creditors, but sells her car to her nephew for $1,000 when it's really worth $10,000. The bankruptcy trustee may have a claim against the filer and her nephew for the remaining $9,000 value of the car. Because this kind of transfer isn't made with bad intent, it won't be a basis for taking away the bankruptcy discharge. The trustee must show that the bankruptcy filer (1) was insolvent; and (2) didn't get fair value back for the transfer.

3. The person who received the transfer may also be on the hook. The bankruptcy debtor isn't the only one who can be chased by the trustee for a fraudulent transfer. The person who received the goods can also be sued. The best defenses the recipient may have are (1) that the property wasn't actually worth anything in the first place; and (2) the transferee accepted the property in good faith and gave back fair value for the property.

4. The trustee can look back six years to find fraudulent transfers. The bankruptcy forms require a filer to disclose any transfer made within the two years before filing. However, the trustee can go after any fraudulent transfer made up to six years back. So people who have a fraudulent transfer in their past often wait until the time limit is passed before filing a bankruptcy.

We deal with fraudulent transfer issues all the time. If you have questions about a fraudulent transfer you made before your bankruptcy, or if you're being sued by a trustee, get in touch.

The bankruptcy process in Minnesota

In this post we describe the bankruptcy process in Chapter 7 and Chapter 13 so you know what to expect when you come see us.

1. You get in touch. Give us a call at 612-564-4025. We can often get you in the same or next day. Your first meeting will be about an hour long. As soon as you decide to hire us, we spring into action, organizing your paperwork and preparing your case. At this point, you can send your debt collectors directly to us—no more endless phone calls.

2. We prepare your case. It generally takes us three weeks to file your bankruptcy petition—a collection of relevant documents and an asset inventory. Once we file your case, collection activity—such as letters, calls, lawsuits and foreclosures—stops immediately. As we prepare your case, we help you choose the best type of bankruptcy for your unique situation—Chapter 7 or Chapter 13.

3. We help you choose what type of bankruptcy is best for you. 

  • You might choose Chapter 7 if: 1) Your expenses are way higher than your income, leaving nothing extra to pay your debt; 2) You don’t own a home, or if you do, you’re up to date on your mortgage payments; 3) You don’t own many valuables.

  • You might choose Chapter 13 if: 1) You can afford to repay some of your debt, but not all of it; 2) You’re behind on your mortgage or you’re underwater with a second mortgage; 3) You have valuable assets, such as home equity, that you want to hold onto.

4. Will I have to go to court? In bankruptcy, you generally don’t have to go to court. Instead, you meet with a bankruptcy trustee a month after your filing date. The trustee evaluates your financial situation. We make sure you’re well prepared, and we’ll be by your side to make sure it all goes smoothly.

5. Finishing your case in Chapter 7. Chapter 7 usually lasts three to four months. Your bankruptcy is typically completed 60 days after meeting with the bankruptcy trustee. Once your case is finalized, your debts are wiped out forever.

6. Your Chapter 13 payment plan.  In Chapter 13, you’ll make monthly payments for three to five years to pay off your debt. We’ll be your lawyers the whole time, in case you need help or your financial situation changes. Once you make your last Chapter 13 payment, your remaining debts are wiped out.

7. Rebuild credit. People who put in some effort to rebuild their credit after bankruptcy can usually make their score rise a lot faster than people who just wait for their credit to fix itself. We meet with all our clients free of charge after the bankruptcy is over to see how we can help clean up your credit report and give you tips for building new credit.

What does Chapter 13 bankruptcy cost?

In an earlier post, we wrote about how we price our Chapter 7 cases. One of the first things a potential client wants to know during a consultation is how much bankruptcy costs. Obviously, every case is different, but here’s a rough version of how we price cases in Chapter 13.

Flat fee

In Chapter 13, you pay a flat fee out-of-pocket. When you're in financial trouble, you want predictability. You don't want your lawyer to run up the bill on you. That' why we quote you a flat fee at the beginning of the process, and that's what you pay. No fine print, no hidden fees. We agree on it at the start so you can plan for the expense.

Payments over time

You don't need to pay your whole fee upfront in Chapter 13. Unlike Chapter 7, in a Chapter 13 case we don't need the whole bankruptcy fee up front. In fact, in many cases Chapter 13 costs less upfront than Chapter 7--some people even opt for Chapter 13 because of our flexible pricing. We generally require a minimum of $1,000 before filing in a Chapter 13, but this can depend on your case.

We get the rest of our fee out of your creditors' pockets. In Chapter 13, we can apply to the court for our remaining fee. Because this comes out of the Chapter 13 payments you're already paying, in most cases it doesn't cost you an extra dime. In fact, if you're looking for an extra way to stick it to your creditors, here it is. The money we receive from the Chapter 13 payments would have lined their pockets if we hadn't applied for it. Our total fee comes out to $2,500 for below-median income cases, $3,000 in above-median cases, or greater if we can prove to the court that it was necessary to charge more.

Filing fees and costs

In a Chapter 13 case, there is a court filing fee of $310 and mandatory credit counseling fees (for our clients, credit counseling runs around $60 for a single filer or $80 for joint filers). You pay those fees to us and we forward them as needed.

And remember--you may not want to bargain-hunt on bankruptcy. The best lawyers will quote you a fair price, but the worst ones will probably discount their fees to try to take business from the good ones. You want a lawyer who’s experienced enough to understand a lot of the tricks and traps of bankruptcy. You also want someone who’ll be available to answer your questions, and won’t blow you off because they’re too busy with all their other cases. And you want someone who’s willing to use the bankruptcy law creatively to help you improve your situation.

What to expect at the bankruptcy meeting of creditors

This post describes what you can expect at your bankruptcy meeting of creditors in Minnesota.

1. What's a bankruptcy meeting of creditors? A meeting of creditors, sometimes called the "341 meeting," is a requirement of bankruptcy. In most bankruptcy cases, you do not have to appear in court. You go to a meeting of creditors instead. In most cases, the meeting is just a formality, but it's important to prepare either way.

2. When is the meeting? Usually three to five weeks after you file your bankruptcy case.

3. Who shows up at the meeting? The bankruptcy meeting of creditors happens in public, so other bankruptcy filers and attorneys will be there. There is also the bankruptcy trustee, who conducts the meeting. The judge is never at the meeting of creditors.

4. But it's called the meeting of creditors. Won't my creditors be there? Creditors show up VERY rarely to these meetings. In the last 100 cases we've been involved in, a creditor has shown up only once, and we totally expected it and prepared for it. Credit card companies, car lenders and mortgage companies almost never show up.

5. What do I need to bring? This is important. The meeting will be canceled and rescheduled if you don't bring proof of ID and social security number. You'll also need your most recent paystub and all bank statements covering the date of filing. We'll ask you for all this stuff way before your meeting so we have backup copies in case you forget.

6. How long does the meeting take? The trustee usually schedules five cases every half hour. So your meeting should take more than a few minutes, unless we've told you that your case is complicated. But if that's the case we'll make sure you're well prepared.

7. What should I wear? Just dress like you would to a meeting at our office. There's no need to dress up, just dress neat (and don't overdo it on the bling--if you come in looking like a zillionaire, people will wonder why you're filing bankruptcy.)

8. What will the trustee ask me? Here are a few questions the trustee is likely to ask:

  • Is this your signature on the petition and schedules? Did you read the petition and schedules before you signed them? Is the information true and complete?

  • Have you listed all of your assets on the schedules? Are you a co-owner of any property with anyone else? (e.g. family cabins)

  • Do you expect to come into any money, such as an inheritance?

  • Does anyone owe you money?

  • Have you paid any creditors in the last 90 days, other than minimum payments?

  • Are you a party to any lawsuits you haven’t identified in your schedules?

  • Are you owed any domestic support? Do you owe domestic support?

  • Have you transferred any property to anyone in the last year? Is anyone holding property for you?

  • Have you previously filed bankruptcy?

9. How should I answer? Just tell the truth. Don't feel like you need to tell a whole story--keep your answers short and sweet--but answer truthfully and completely. If you don't know the answer to a question, ask for clarification--it's better not to answer right away than to answer incorrectly.

10. Where is the meeting? 

Do I need to file business bankruptcy?

This post explains business bankruptcy and helps you figure out if it's a good idea for your business.

1. I have business debt. Do I need to file bankruptcy?

I am a sole-proprietorship. If you are a sole proprietor, you are the business. This means that the business assets are your assets, and the business debts are your debts. If you file personal bankruptcy (under Chapters 7, 13 or an individual Chapter 11 case) your business debt will be wiped out and your business creditors can't collect from you.

I am an LLC or corporation. If you own a separate legal entity, then filing personal bankruptcy won't wipe out your business debts. To take care of business debts, you can do a few things:

  • - Negotiate with the lender to settle the debt;

  • - Close your business and turn over any leftover assets to your creditors; or

  • - File a business bankruptcy to reorganize your debt.

2. How do I close my business without filing a business bankruptcy?

You can close a business by filing a "dissolution" with the Minnesota Secretary of State’s office. Dissolution gives notice to your creditors that you are closing up shop, and gives creditors a chance to try to collect assets before the business is wrapped up. You may be able to dissolve a business on your own, but you’ll probably want to consult an attorney first, to see if there will be any issues to watch out for.

3.   Do I need to file business bankruptcy?

Generally not. If your business has lots of real estate, secured debts, or large assets, you may want to look into business bankruptcy to reorganize your debt. But most people don’t need business bankruptcy. If you have a business that’s insolvent, the dissolution process described above should be enough.

4.   Are my business debts wiped out in my personal bankruptcy?

If you close a business and you have personally guaranteed the debts, the business creditors may try to collect from you after the business is closed.

Your personal liability on your business debts is erased. This means that if you default on your business debt, your creditor cannot come after you personally for that debt. On the other hand, this doesn’t prevent the creditor from collecting the business’s assets.

One other important point—if you have business debts, and a business bank account with the same creditor, your creditor probably has the right to take money directly out of your business account if you don’t pay the business debt, even after a personal bankruptcy. If you are keeping your money with a bank that is a creditor, the smart play is to move it as soon as you can.

My Chapter 13 was confirmed. What now?

This post describes what happens after a Chapter 13 bankruptcy is confirmed. Confirmation is the biggest hurdle in Chapter 13, but it's not the end. Congratulations, your Chapter 13 plan has been confirmed! (If our congratulations are early, don't worry--your turn will come too). Since you'll be in Chapter 13 for three to five years, you probably have a bunch of questions about what to expect. We'll tackle a few of these below. If you have other questions, please leave them in the comments below.

1. When do I make my first payment to the trustee? Your first Chapter 13 plan payment is due within 30 days of filing your case. The payment must be by money order to the P.O. Box specified on your welcome letter form the trustee's office. Future payments can be made by automatic debit from your bank account, if we arrange that ahead of time with the trustee's office.

2. Which of my bills should I pay while I'm in Chapter 13? You'll need to pay your new, ongoing bills on time. This always includes utilities, generally includes your mortgage, and sometimes includes your car loan and student loans. Every once in a while, it'll include a credit card if you have a cosigner. But your bankruptcy lawyer should have the final word on what bills to pay. If you're not sure, ask.

3. I'm still getting calls from creditors. What do I do? Your creditors are breaking the law if they contact you after you file Chapter 13. On the first call, you can tell the creditor you filed bankruptcy and give them your case number. If you keep getting calls, you should let your bankruptcy lawyer know right away.

4. I need to buy a new car. Can I take out a loan while I'm in Chapter 13? You'll need permission from the court to take out any new loan while you're in Chapter 13. If you absolutely need financing, call us first so we can take you through the steps of the process.

5. What do I do if I'm going to miss a payment? If you're in danger of missing a Chapter 13 payment, or if you already missed one, call your bankruptcy lawyer. In some cases, we can work with the Chapter 13 trustee's office to help you get caught up on your payments. Otherwise, we might be able to modify your plan. If you don't get in touch before missing a payment, the trustee can move to dismiss your case. The most important thing is that you let us know in advance so we can prevent this from happening.

You're probably starting to pick up on a trend here. If you have a question, call your bankruptcy lawyer. Most of the problems that come up with confirmed Chapter 13 plans can be avoided as long as we know about them in advance. But let us know in the comments below if you have other questions.

How to prepare for your free consultation

1. What to expect. We offer free 30-minute phone consultations (for your convenience), or meetings in our office if you’d rather see a friendly face in-person. And just so you know, your free consultation isn't like a visit to the doctor, where you spend most of your time with a nurse or intern until the doc breezes through at the very end. When you consult, you will always talk to an attorney.

2. How to get ready. We don’t love paperwork (who does?!). Before your consultation, we’ll ask you to fill out a five-minute online form that helps us understand the issues you're facing. If you end up filing bankruptcy, we’ll need a lot more, but we’ve got an easy-to-use online system for getting those docs to us after the consultation.

3. Brush up on bankruptcy. We're happy to explain the ins and outs of bankruptcy to you. We do this stuff all day, and we like to share what we know with you. But if you study up a little bit and understand the basics, we might be able to delve into deeper issues on the first meeting, meaning we can get more accomplished in the free consultation. If you're the type who likes to do your own research, our blog is a good first resource. We also recommend the Bankruptcy Law Network's posts, but remember that they're focused nationally, and because the law is different from state to state, not all the information will apply to you.

4. After the free consultation. Many times we can sort out all your issues in your free consultation and decide on a course of action. Other times we need to do more digging before we can fully understand your options. Throughout this process, feel free to ask any questions that come to mind.

Still have other questions before your first appointment? Let us know.