By Kara O’Donnell, Bankruptcy Attorney

(857) 526-1355       Quincy, MA
www.QuincyLegal.com

In a bankruptcy filing, debtors have the right to claim a generous amount of property as exempt.  (Exempt property is NOT allowed to be taken by the Trustee and sold to pay the creditors.) 

While most debtors choose to use the Federal exemptions,  debtors who have a large amount of equity in their home most often prefer to use the Massachusetts property exemptions instead.  Consult with a bankruptcy attorney to determine which plan of action is right for you.

While there is a set dollar amount of property that can be exempted in Federal exemptions, there also exists ADDITIONAL exemptions to protect almost all of your retirement funds in bankruptcy. This is a very broad protection that applies to all types of plans including 401(k) plans and 403(b) plans. IRAs and Roth IRAs are protected but only up to the amount of $1,000,000.  (There are some exceptions as to rollovers – consult with a qualified bankruptcy attorney.)  

And as mutual funds are not retirement funds, they would be subject to the exemptions mentioned at the beginning of this post.

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

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By Kara O’Donnell, Bankruptcy Attorney in Quincy, MA

www.QuincyLegal.com

In one of my previous posts, I addressed a widely used banking practice of the “Automatic Overdraft Protection.” View here https://quincylegal.wordpress.com/wp-admin/post.php?post=143&action=edit

The problem was that the banks, without even requiring your approval, would allow you to withdraw funds from the ATM or make charges to your debit card and then HIT YOU WITH AN OVERDRAFT FEE. Remember the old days? When if you didn’t have enough money in your account, the ATM would say DECLINED? Those days are long gone and have been for quite a while.

BUT NOW, there are new Federal regulations coming into play – finally! Score one for the consumer!! It seems new laws now require the banks to decline the ATM withdrawal or debit card transaction UNLESS you opt in. (Note: Do NOT opt-in. You will forget you have done so then regret it later when you see 3 overdraft charges on your account for one day of buying coffee, lunch and dinner.)

Below is a notice I just got on my Sovereign/Santander account.

Important Changes to Your Account.
Under new federal regulations that will take effect this summer, Sovereign will no longer authorize overdrafts* on your checking or money market savings accounts for the following transactions**, unless you authorize us to do so by opting-in to our overdraft program:

ATM withdrawals and transfers
One-time debit card transactions

If you opt-in and one of these transactions overdraws your account, Sovereign may pay the transaction. If we do so, we will follow our standard overdraft policy*. If you do not opt-in to this program, and you try to make transactions when you do not have sufficient funds, we generally will decline the transaction.

Learn more about ATM and Debit Card Overdraft Elections.

To opt-in, call 877-SOV-BANK (877-768-2265) or visit your local branch today.

* An overdraft on your checking or money market savings account occurs when you do not have enough money in your account to cover a transaction, but the transaction is still processed by Sovereign. Under Sovereign Bank’s standard account overdraft practices, a fee of up to $35 will be charged for each overdraft on your account. If your account is overdrawn for 5 or more consecutive business days, an additional $5 per day will be charged. There is a limit of 9 fees per day for overdrawing your account.

** Sovereign will continue to authorize overdrafts for checks and other transactions made using your account number, automatic bill payments, Online Banking payments and transfers, and recurring debit card transactions. Overdrafts are always paid at our discretion, and we do not guarantee we will always authorize and pay any type of transaction. If we do not authorize and pay an overdraft, your transaction will be denied.

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

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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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

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

Many who are considering Chapter 7 bankruptcy want to know how the process will go over the coming months, and how long it will take.
In many cases, you can expect to get your Order of Discharge within 4-6 months from the date your action is filed in the federal bankruptcy court.

Your case begins on the day you file it with the court and you get your case number. This is the day that the ‘automatic stay’ (temporary injunction) goes into effect. It prevents your creditors from contacting you or harassing you for payment.

In approximately one month, you attend the 341 meeting of creditors with your attorney which is held before the court appointed Chapter 7 trustee. In almost all cases your creditors will not even show up. You must bring your social security card (or a W-2, NOT a tax return) and a photo ID.

After the 341 meeting you have 45 days to complete a Financial Management Course, get the certificate AND file it with the court. Because it can take 2 hours to complete the course and a few days to get your certificate, it would be very unwise to leave this final act on your (the Debtor’s) part to the last week. Most responsible attorneys will start pestering their clients for it at least 2 weeks before it is due. Mess up this step and your case will be DISMISSED. No discharge of debts. Nada.

The Order of Discharge comes after the certificate is filed, and is usually 4 months or so after your date of filing.

If you live in Massachusetts and are considering bankruptcy, do your homework. Find an attorney who is experienced in bankruptcy, has years of law practice under his/her belt, has no record of discipline, and operates out of a real office and not a “virtual” or rent-by-the-day/hour office. [To check out MA attorneys go to http://www.massbbo.org.]

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

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By Bankruptcy Attorney, Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES
Quincy, Massachusetts

A common question I am asked by bankruptcy clients (or potential ones) is whether they could a) lose their job if their employer learns they filed for bankruptcy or b) could they be discriminated against when they apply for jobs because of the bankruptcy filing?

11 U.S.C. Section 525 of the bankruptcy code prohibits termination or discrimination with respect to employment solely because the individual is bankrupt. However, it is difficult to prove that the bankruptcy is the “sole” reason for the termination or the discrimination.

It can be a rather high burden of proof to meet. Why? Because employers are reluctant to admit or put into writing that they terminated an employee (or refused to hire a candidate) solely because of a bankruptcy filing.

That being said, a bankrupt employee can take measures to protect himself. Keep track of downgrades in performance evaluations and other efforts that employers use to create a file on you to back up their termination. Employment discrimination is usually subtle and, in employment-at-will states, such as Massachusetts, employers can use just about any reason to terminate you (so long as it is not based upon protected classes ex: race, gender, religion, etc.)

Bankruptcy filers can keep records of their employers’ actions if they believe that a) their employer knows they filed for bankruptcy and b) they might get fired or demoted for it. If fired, contact an attorney.

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

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In 2004 to 2005, word spread that a new bankruptcy law would soon go into effect.  The fear was that many, if not most, people would be prevented from filing Chapter 7 and getting a full discharge of debts. Because of this fear, the filings just prior to the BAPCPA law coming into effect hit over 2,000,000 for the year 2005!

2006 saw a much lower number, as many of those who had been considering bankruptcy for a few years decided to file before the new law came into effect. 2006 filings? A relatively low 573,151.

2007: Word was spreading that the revised bankruptcy law still allowed many middle to lower income people the help they needed and the number of filings again went up. 2007? 801,880.

2008: The U.S. slips into recession mode and unemployment is climbing. While many ran up credit cards in the mid-2000’s, they were now no longer able to make the minimum payments. Interest rates and late fees on those cards only added to the problem. 2008 filings? 1,060,061.

2009: 10% unemployment and no signs of job creation lead to an economic meltdown for millions of middle income families across the country. 2009 filings? 1,406,125.

Will we see total filings for 2010 hit TWO MILLION? It seems possible given the (still) high unemployment rate and lack of significant job creation.

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

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The short answer – YES.  And NO.

  Chapter 7 bankruptcy has no limit on the total debt involved.

 As for Chapter 13 bankruptcy filings, since 2007 the limit of debt has been $1,010,650 in  secured debt, and $336,900 in unsecured debt.  But on April 1, 2010, those debt limits will increase in accordance with the Consumer Price Index increase which has occurred over the past 3 years.  The estimated new limits will be $1,081,500 for secured debt, and $360,525 in secured debt.  

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

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By Massachusetts Bankruptcy Lawyer Kara O’Donnell

http://www.QuincyLegal.com

See my post below for more details . . .

by Attorney Kara O’Donnell
O’Donnell Law Offices
www.QuincyLegal.com

If you are under 21 and of limited income (i.e. most college students) you may only have a matter of days before you can obtain a credit card WITHOUT a co-signor.  See my recent blog post below for details of the CARD Act which goes into effect February 22, 2010.

Essentially, President Obama is on a mission to reduce the availability of credit cards to young consumers.  This is a direct response to the long-standing efforts of credit card companies to sign up jobless and naive college students.  The goal is to solve a problem that hurts so many college graduates – too much debt.

This is a summary of the “Youth and Credit” provisions of the Act:

  1.  Less Access to Credit Cards Before the Age of 21
    The CARD Act’s most significant rule is restricting the availability of credit cards to young adults thus preventing reckless spending.
  2. Credit cards will not be issued to anyone under the age of 21 UNLESS:
    (i) they have an adult (of at least 21 years of age) to co-sign the credit card agreement (this adult would, presumably have to have good established credit),  OR
    (ii) they provide proof that they are able repay the debt they incur (This most likely excludes the part-time workers).
  3. Pre-screened credit card offers cannot be available to consumers under the age of 21. 
  4. Joint credit card accounts can only have their limits increased with the permission of the adult accountholder.

An End to Visa Kiosks on College Campuses?
Kiosks offering free stuff in exchange for completed credit card applications (by poor jobless college students, of course) will probably cease to exist on  college campuses.  (NOTE: The Visa kiosks offering free blankets at Fenway to cold late-season Red Sox fans are sure to continue . . .)

Promotion for Financial Literacy
The CARD Act also proposes educating the young about the responsible use of credit.  While the plan is still in its formative stages, it will be interesting to see what becomes of it.  Will grade schoolers be forced to take classes in  math, reading, science, geography and Amex  vs. Visa?  Time will tell.

Kara O’Donnell, Esq. is a bankruptcy attorney in Quincy, MA. Call 857-526-1355 for help with your bankruptcy filing. http://www.QuincyLegal.com

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES
Quincy, Massachusetts
http://www.QuincyLegal.com
Help@QuincyLegal.com

Posted by Kara O’Donnell

By Boston Bankruptcy Attorney Kara O’Donnell, Esq.
(857)526-1355

In 2009, the Obama administration realized that unless the credit card companies were somehow reeled in, consumers would continue to be taken advantage of and, possibly, never get out of debt.  The result?  The Credit Card Accountability Responsibility and Disclosure Act of 2009  (also known as the CARD Act.)

Effective February 22, 2010:

  • Credit card issuers will not be able to increase interest rates on existing credit card balances unless the borrower is at least 60 days late on the account. This will eliminate the retroactive rate increases and the universal default clause where credit card issuers would periodically review an account holder’s current credit standing to determine changes in terms and annual percentage rates.
  • Credit card issuers will have to provide clear disclosure of account terms before a borrower opens an account. If the account provides a promotional interest rate period, the promotional interest rate will have to last a minimum of six months.
  • Credit card issuers will not be able to raise interest rates on new credit card accounts during the first year the account is opened. This rule will not apply if the borrower falls 60 days late on a credit card payment.
  • Credit card issuers will not be able to charge over-limit fees unless they obtain the account holder’s consent to accept and process over-limit transactions beforehand. If consent is obtained, the card issuer will not be able to charge more than one over-limit fee per billing cycle. Additionally, credit card issuers will not be able to charge an over-limit fee if interest charges or other fees are the sole reason for pushing the account holder over their limit.
  • Credit card issuers will not be able to charge additional payment penalties for accepting payments by mail, phone, electronic transfer, or any other means, unless the payment is processed through an expedited service processor.
  • Credit card issuers will face significant hurdles if they try to issue credit cards to consumers under age 21 without an “of-age” co-signer, unless they meet sufficient income requirements to independently repay the debt.
  • If a due date falls on a weekend or holiday, the credit card issuer will not be able to penalize mailed payments that are received on the next business day. Payments received by 5 p.m. must be credited the same day.
  • Double-cycle billing, a process where credit card issuers use the previous month’s balance to calculate interest charges for the current month, becomes illegal.
  • Credit card issuers will be required to apply any payment above the minimum amount due to the highest interest balance first.
  • Subprime or “fee harvester” credit cards will have fee limits. Fees on a credit card (other than late fees, over-limit fees, or insufficient funds charges) will not be able to exceed more than 25 percent of the credit limit when the account is opened.
  • Credit card issuers will have to include a minimum payment disclosure that explains how long it will take to pay off the existing balance and the total cost in interest fees if the cardholder paid only the minimum amount due. Additionally, card issuers will have to provide minimum payment details and the total cost in interest to pay off the existing balance within 3 years (36 months).
  • Card issuers will have to make account terms and cardholder agreements available to their cardholders on the Internet.

 WHAT THIS ALL MEANS TO THE AVERAGE CARDHOLDER:

The days of the credit card companies being in TOTAL control are GONE.  However, don’t be fooled.  If you are a person who charges frequently and only pays minimum monthly payments, the only difference is that the number of years/DECADES it will take to pay off your debt will be indicated right on your bill.  Under 21 card applicants will need a co-signer.  (Gone are the days of on-campus credit card kiosks where they solicited to student WITHOUT JOBS.)  Also, you will not be charged more than one over-the limit fee per month, and this seems to only be allowed on purchases you made and not because your account went over the limit last month due to interest or other fees.

Sure, the consumer receives additional protection from the CARD Act. However, if you are one of the many “only pay the minimum every month” or you are charging necessities every month (groceries, utilities, cash advances) then NOW is the time to take a second look at your overall financial health. 

If you are a person who sees no way out of your credit card problems, a Chapter 7 bankruptcy might be right for you.  Call Massachusetts Bankruptcy Attorney Kara O’Donnell for a free consultation at (857)526-1355.

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES                    (857)526-1355
Quincy, Massachusetts

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By Bankruptcy Attorney Kara O’Donnell

www.QuincyLegal.com

Quite often by the time a client comes to me to file bankruptcy he has already had months of being unable to meet the credit card minimum payments and is desperately in need of help.  However, many of these clients have used up assets to make these minimum payments even though a) those assets WOULD HAVE BEEN PROTECTED in a bankruptcy, and b) continuing to make minimum-only payments will get you nowhere in the long run.

There are some classes of assets that receive automatic protection in a Chapter 7 bankruptcy:  Retirement accounts, monies obtained from personal injury settlements, monies received from workers’ compensation accidents, alimony, child support, some life insurance policies, and veterans’ benefits.  In short, NONE of these types of funds should be depleted in efforts to make credit card payments.  WHY?  Because if you can’t afford the payments this month what makes you think you will be able to afford them in the near future?  And, once those assets are gone, you will have no emergency funds to continue making the minimum payments.  The end result will be that you will end up filing for bankruptcy anyway AND your emergency funds will be gone.  Not the best outcome.

A better outcome?  If you are having trouble meeting your credit card minimum payments consult with a bankruptcy attorney TODAY.  Most attorneys, including myself, offer a free consultation for bankruptcy clients and, by doing so, you can create a financial plan for your future which involves both 1) the fresh start that bankruptcy provides and 2) still keeping your retirement accounts or other protected funds outlined above.

The key to your bankruptcy filing? Filing sooner and not later.

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

By Bankruptcy Attorney Kara O’Donnell, Quincy MA  Call 857-526-1355 to answer YOUR bankruptcy questions in MA.

___________

Just this week I was the victim of an online hacking to my personal checking account, linked to a Paypal account.  However, the resultant Insufficient Funds (NSF) fees reminded me of a documentary I had watched which investigated how the banks made money, expecially by offering so many “free” “no-fee” accounts.   The answer, in part?  NSF FEES.

When a person has several charges within a few days’ period the banks will actually process the LARGER ones first then the smaller ones after that, regardless of timing.  They do this to maximize their overdraft fee charges.   And, in fact, they have a SOFTWARE designed to do just that.

TRUE STORY!  On Jan 31, 2010, I bought my Chihuahua, Taz, a dietary supplement online at Ebay, paid through Paypal, for a cost of $17.33. I had the money in the bank. It would have no trouble clearing.

On Feb 1, ALSO through Ebay and Paypal, a hacker goes online and buys 2 $500 gift certificates with my account. Now CURIOUSLY, not only did the $500 charges bounce but also the $17 one which was the day BEFORE the fraud charges.  How does THAT happen?

In a documentary I recently watched (PBS maybe) a bank president admitted that they hold  multiple charges (in a few days period) then process the LARGE ones first.  The interviewer asked, “but doesn’t that result in more NSF fees to the consumer if they then get hit for  NSF fees for their $3 Starbucks charge, $2 bagel etc?”  The bank president then stated that the bank viewed it that, “We thought the consumer would appreciate their large charges, like rent or auto payments, being processed first.”

Geez, thanks alot, Rich Bank Guy.

So, that explains it. On Day 1 you make 3 small charges.  On Day 2 you charge coffee then lunch then breakfast.  On Day 3 you pay your car or rent online.  You know you’re $50 short but figure, “Oh well. I’ll get one NSF fee.  At least my payment won’t be late.”   Then you check your account a day or two later and discover SIX insufficient funds fess – all at $35 each”  Now you are not just $35 in the hole BUT $210 in the hole.

In a USA TODAY article, it reported that in 2009, Bank of America settled a class action lawsuit over their overdraft fees.  They also had the software to calculate how to generate the most overdraft fees when a customer went negative on his or her account. 

But have the banks stopped this practice?  Obviously not.  Look at a screenshot of my Sovereign Bank account charges below.  My EARLIEST charge for the dog medicine was processed LAST even thought it was purchased the day before the hacker hit!

WHAT A SCAM!!!

_____________________________________________________________________________
BALANCE 818.96 NEGATIVE.   The earliest fees area at the bottom

02/02/2010  INSUFFICIENT FUNDS  FEE       $35.00-
 02/02/2010  PAYPAL INST XFER 100201 5JFJ243L       $17.33-
 02/02/2010  INSUFFICIENT FUNDS FEE       $35.00-
 02/02/2010  PAYPAL INST XFER 100201 5JFJ243M9E       $500.00-
 02/02/2010  INSUFFICIENT FUNDS FEE       $35.00-
 02/02/2010  PAYPAL INST XFER  100201 5JFJ243M9      $500.00-
02/01/2010  CHK CARD PUR 83xxxx HOMESTEAD.COM   CA       $4.99-

The good news? NSF fees are dischargeable in a Bankruptcy. Of course, only a small fraction of people affected by this will actually end up filing for bankrupcty. Most will be forced to just take their lumps and walk away.

(On a side note: The banks allow you to withdraw money you don’t have, they call it overdraft protection and they make their NSF fees on it. Interestingly, most banks will NOT allow you to turn off this “protection.” Trust me, I’ve tried.)

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

by Bankruptcy Attorney Kara O’Donnell of Quincy, MA   

When a new client calls me or comes into my office for a consultation we go over a standard list of issues. However, no two cases are ever the same!   

A standard question is “What is your household size?” Seemingly easy to answer, what if you were living with your spouse and kids but in your parents’ house? What if you were living with a wealthy friend, someone who was just helping you out with a cheap/free place to live but who did not pay your bills or otherwise give you money?   

One, two, three, four . . .

 

The issues have become complicated considering that there are so many more living arrangements than the traditional family. Non-traditional living arrangements can include extended families, domestic partnerships, roommates, nannies, etc. When these situations arise, your bankruptcy attorney now must determine who to count.   

Some cases are more clear cut than others. Your family (you, your spouse & 2 kids) live with your parents in an in-law apartment in your parents’s house? The separate households seems just that, and you would easily be able to claim a household of FOUR on the Means Test. However, for more grey areas, such as two families sharing a house, there are no clear cut answers. The information you should be prepared to give your attorney should include: who pays the bills, is there a family relationship to the other parties, do any parties pay rent or utilities?   

Why do we bankruptcy attorneys care so much about your household size? Because it is a determining factor in the Means Test. The basic purpose of the Means Test is to determine whether a debtor is eligible to file a Chapter 7 petition based on a rather complicated calculation of the debtor’s income and expenses. If you don’t pass it, you may not be allowed to file Chapter 7 and must then consider filing for Chapter 13 (the repayment plan.) Thus, the lower the final figure on the means test, the better. Generally, the more individuals who live in the household, the easier it is for the debtor to qualify for Chapter 7. This is because the Household Size is compared to the State median income for a household of the same size.   

The Means Test is not only based on “household size” but also “household income.” Household income and the number of individuals in the household are central issues in the means test. But, interestingly, “household” is not a term defined in the Bankruptcy Code.   

Which leaves us . . . WHERE?
One bankruptcy attorney I know of uses a general rule of “whoever sleeps in the house more then 3 nights a week or is financially dependent on someone else in the house should be seriously considered as a member of the household for the means test as well as schedules of income and expense.” While this seems like it could provide answers to many, if not most clients, remember, every case is different from the last! You must provide your bankruptcy attorney with as much information as possible so that he/she can provide you with the best legal advice for your own situation.   

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

by Attorney Kara O’Donnell
O’Donnell Law Offices
http://www.QuincyLegal.com

A new year brings more changes to the face of bankruptcy in the Boston Bankruptcy Court. 341 Creditor Meetings are now being held at the Post Office Square location in the heart of the Financial District.

As for substantive changes to the bankruptcy law . . . there has been ongoing debate in Washington about a proposed pro-consumer amendment to the Wall Street Reform and Consumer Protection Act.

This Act would change the law and allow bankruptcy judges, in certain cases, the flexibility to not only reduce mortgage interest payments but also the actual principal of the loan. (They already can do this for second vacation-type homes, a loophole benefitting the well-to-do.) Under current law bankruptcy judges may not alter the principal amount due on primary mortgages.

In fact many economists believe that the only real way to slow the number of foreclosures is to allow such a law to be put into place.
But the 2,400 member strong Mortgage Bankers Association is dead set against it and is arguing that the proposed cram-down legislation “will encourage more homeowners to opt for bankruptcy, and it will inject new risk into the mortgage market, thus making it more difficult for borrowers to buy, sell, or refinance a home.” Sound like a bunch of malarkey to you?

Keep an eye on the news for developments. If there’s anything that cash-strapped homeowners could use in 2010, it would be just a little more help from Washington.

Kara O’Donnell, Esq. is a bankruptcy attorney in Quincy, MA. Call 857-526-1355 for help with your bankruptcy filing. http://www.QuincyLegal.com

Kara O’Donnell, Esq.
O’DONNELL LAW OFFICES
Quincy, Massachusetts
http://www.QuincyLegal.com
Help@QuincyLegal.com

Posted by Kara O’Donnell