A decision to file for bankruptcy should be made only after determining that bankruptcy is the best way to deal with your financial problems.

Many were under the impression that the 2005 change in bankruptcy laws now prevent many individuals from filing bankruptcy. While bankruptcy has become a bit more complicated, at least for the attorneys preparing the filing, most people still find themselves eligible to file and obtain the fresh start that bankruptcy offers.

What Is Bankruptcy?
Bankruptcy is a legal proceeding in which a person who can not pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. In Massachusetts, these courts are located in Boston, Springfield and Worcester. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
– Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.
– Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments.
– Eliminate a 2nd mortgage but only a) in a Chapter 13 filing and b) if your first mortgage is already MORE than your house is valued.
– Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
– Restore or prevent termination of utility service.
– Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

If you are considering filing for bankruptcy and you live in Massachusetts, contact Bankruptcy Attorney Kara O’Donnell at 857-526-1355.

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES (857)526-1355
Quincy, Massachusetts
http://www.QuincyLegal.com

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Posted by Kara O’Donnell

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By Kara O’Donnell, Bankruptcy Attorney

Occasionally people with credit card debts (who are usually past due) will get notices in the mail from a collector which offers to settle a credit card debt. Sometimes these offers are for 50% of face value of the debt. But there are 2 problems:

1) You will only get this notice if you are already past due on your credit cards minimum payments. And if you cannot afford the minimums how will you settle for 50% of the bill, especially when they want the payments in a lump sum?

2) Your balance is $20,000 but the collector is offering to settle for $10,000. Sounds great? Maybe you sell a car to get the money or borrow from a relative, but then comes the surprise sometime around tax season . . . a 1099-C form for $10,000. The 1099-C form is for cancelled debt and you must file it with your return. The IRS will treat that $10,000 as taxable income – same as if you got a bonus from a job or gambling winnings. Depending on your income tax bracket that $10k “gain” that you got (from the written off/cancelled debt) will be subject to 25-40% in taxes.

HOWEVER, while cancelled debt may create an income tax liability, discharged debt does not. Under the U.S. Bankruptcy Code, if a debt is discharged in a bankruptcy case, it does NOT count as taxable income. Bottom line? In a Chapter 7 bankruptcy, you will get your unsecured debts, such as credit cards, discharged and NO 1099-C will show up at tax time.

This is just another reason why the decision to use a debt management company needs to be very carefully considered prior to giving them any money whatsoever. They cannot prevent the IRS from knocking on your door wanting to tax you on the cancelled debt.

Is it possible for a bankruptcy filer to get a 1099-C for discharged debt?
This has occasionally been known to happen. (Those creditors are sneaky!) However, the filer needs only to know the law is on his side and to file IRS Form 982. This will exclude the amount of discharged indebtedness from your gross income. (Remember – there is a very big difference between cancelled income and discharged income.)

By Bankruptcy Attorney Kara O’Donnell
QuincyLegal.com – O’DONNELL LAW OFFICES – 857-526-1355

As you debtors are probably already aware, debt collectors come in a variety of shades and colors. Sometimes the debt is still “in house” (meaning it is still within the company that issued the credit card or gave the loan). Sometimes the debt is with a collection agency or even with a law firm. Regardless of who owns the debt, there are laws which control any company whose business it is to collect a debt – i.e. DEBT COLLECTORS.

MASS LAW ON DEBT COLLECTION
In the Commonwealth of Massachusetts, the main debt collector law is MGL Chapter 93: Section 49.

Here are some highlights:
Subsection A: The collector can threaten to report the debt to a bureau. The collector may NOT reveal information about the debt to third parties, such as neighbors, employers, etc.

Subsection C: “The creditor communicates with the alleged debtor in such a manner as to harass or embarrass the alleged debtor, including, but not limited to communication at an unreasonable hour, with unreasonable frequency, by threats of violence, by use of offensive language, or by threats of any action which the creditor in the usual course of business does not in fact take.” This is a pretty broad prohibition. However, the Federal law (see below) outlines when those “reasonable hours” are and provides more clarification.

Subsection D: “The creditor communicates with alleged debtors through the use of forms or instruments that simulate the form and appearance of judicial process.” Creditors/collectors cannot send you documents appearing to be from the court or a lawsuit if, in fact, there is no suit pending.

If you have experienced any of the above, it “shall constitute an unfair or deceptive act or practice under the provisions of chapter 93A.” You may choose to contact an attorney who can file a “93A Complaint” for you.

FEDERAL LAW ON DEBT COLLECTION
The Fair Debt Collection Practices Act provides that any of the follwing acts is a violation:
-Hours for phone contact: contacting consumers by telephone outside of the hours of 8:00 a.m. to 9:00 p.m. local time.
-Failure to cease communication upon request: communicating with consumers in any way (other than litigation) after receiving written notice that said consumer wishes no further communication or refuses to pay the alleged debt, with certain exceptions, including advising that collection efforts are being terminated or that the collector intends to file a lawsuit or pursue other remedies where permitted.
-Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously: with intent to annoy, abuse, or harass any person at the called number.
-Communicating with consumers at their place of employment after having been advised that this is unacceptable or prohibited by the employer.
-Communicating with consumer after request for validation has been made but prior to the debtor receiving a response to the request.
-Misrepresentation or deceit: misrepresenting the debt or using deception to collect the debt, including a debt collector’s misrepresentation that he or she is an attorney or law enforcement officer.
-Threatening arrest.
-Threatening legal action that is either not permitted or not actually contemplated.
-Abusive or profane language used in the course of communication related to the debt.

If collectors have engaged in any of the FDCPA prohibited acts while trying to collect a debt from you, they you may wish to hire an attorney to file a FDCPA Complaint on your behalf. The collector can be subject to a $1,000 for each violation.

KNOW YOUR RIGHTS: you cannot be arrested, they cannot garnish your wages if you are not (or was not) in a lawsuit, they cannot call you at your employer if you tell them to stop (in MA it is only for 10 days but tell them anyway), and they cannot call you multiple times all day long.

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES (857)526-1355
Quincy, Massachusetts
http://www.QuincyLegal.com

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Posted by Kara O’Donnell

Well at least as it applies to the Creditors in bankruptcy cases. You know who Creditors are: banks, credit cards, auto finance companies, school loans, your match.com account (just kidding).

2 weeks ago a unanimous Supreme Court concluded that bankruptcy creditors ought to read their mail once in awhile. Perhaps even pay attention and act upon what they read there. Otherwise, they have only themselves to blame. Seems pretty straightforward, no?

This decision involved a rather straightforward case.

A man filed a Chapter 13 plan in 1993. He included a provision in this plan that would discharge the interest on his student loans — something that normally would require he prove undue hardship through an adversary proceeding. He mailed a copy of this plan to the lender. The lender filed a claim asking to be included in the case but did not object to the plan. So the court approved the plan. The consumer completed his plan, received his discharge and that should have been the end of it. He walks away and thinks all is fine.

But the student loan lender did not agree and sought a ruling from the courts that it should not be bound by the plan. It admitted it received notice of the case and a copy of the plan. It just apparently didn’t read the plan. So several years later, it wanted to go back and “fix” the problem. (NOTE: Does this seems fair to you? Yeah, me neither, but read on . . .)

The Supreme Court disagreed. It said, in effect, the federal rules allowing a party to a case to set aside “void” judgments or decisions should not be used in this way. And this is true, even where the debtor has included a provision in the plan which would normally not be allowed. If the creditors, the trustee and the court do not object, it will be binding on the creditors who receive actual notice and sleep on their rights.

Of course, for most people it doesn’t take the Supreme Court to tell you to pay attention to legal mail. Many children and most adults could grasp this simple logic. But the irony is that multi-billion dollar companies would prefer the courts change the rules so that carefully reading the fine print of documents sent by consumers is not required.

Now, the Chapter 13 trustee has to read the plan, so why wouldn’t the creditors try to get her to absorb the extra costs of objecting to “inappropriate” plans? Could it even happen?

In this case the non-readers Citibank, Chase and Wells Fargo got beat up in court by a single bankrupt consumer and his lawyer.

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES (857)526-1355
Quincy, Massachusetts
http://www.QuincyLegal.com

Help@QuincyLegal.com

Posted by Kara O’Donnell