Debt Collection

Welcome to our new attorney Todd Murray

Tuesday, April 16th, 2013

todd photoWe’re proud to announce that Todd Murray has joined our team. Todd was formerly the principal of the Todd Murray law firm, where he defended Minnesotans against debt collection lawsuits, filed claims against debt collectors under the Fair Debt Collection Practices Act, and helped people dealing with wrongful repossession.

Todd is a fearless litigator and brings an enhanced focus on debt collection defense and FDCPA work to Friedman Iverson, as well as bringing his litigation chops to beef up our auto fraud work.

Todd is from Superior, WI, played first-string quarterback at Macalester, and now lives with his wife and three kids in South Minneapolis. He still keeps up a blog reporting on consumer law issues here.

Posted in Auto Fraud, Debt Collection, FDCPA, News, Repossession | No Comments »

Why did a debt collector send me a 1099-C?

Wednesday, February 22nd, 2012

1099-CRe-posted for the upcoming tax season! This post describes how tax reporting of forgiven debt works. It also gives some solutions if you’ve been hit with a 1099-C for debt forgiveness.

It’s time to face the tax man again, and some consumers are surprised to receive a 1099 from a lender or debt collector they dealt with in the last year, counting income to the consumer for debt forgiveness. The amount on Form 1099-C states the income “derived” from the forgiveness or settlement (for less than the full value) of a debt. Because the lender wrote off a debt (or a portion of a debt) it believed it was owed, it has the right (but not necessarily the obligation) to charge the income to you. Here are some exceptions.

1. A lender can’t send a 1099-C for debt discharged in bankruptcy. If a debt was discharged in bankruptcy, the lender can’t issue a 1099-C for debt forgiveness. However, let’s say a debt was settled in January of 2010, and then you filed bankruptcy in February–then the debt forgiveness would be income.

2. Discharge of debt on principal residence. The federal Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude debt forgiveness income from the discharge of debt on their principal residence up to $1 million. So debt reduced in a mortgage modification, as well as debt forgiven as part of the foreclosure process, will not generally count as income.

3. You were “insolvent” when the debt was forgiven. The insolvency exception is a powerful tool for many people. If, on the day before the debt was settled or forgiven, all your assets (including your retirement accounts) were less than your total debts (including your mortgage)–then you don’t have to count a 1099-C as income. File IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness

4. The debt is disputed and the lender can’t prove you owed it. If you don’t owe the debt and the lender can’t prove it’s legit. you may be able to contest a 1099-C. Contact a tax attorney for help.

We aren’t tax attorneys. If you need help with a tax issue, please consult a specialist. But if you’ve received a 1099-C and you think you fall under one of these exceptions, get in touch.

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Posted in Bankruptcy, Debt Collection | 1 Comment »

TCPA robocall cases can now be brought in federal court

Thursday, January 19th, 2012

Lately, it’s not often that the U.S. Supreme Court rules in favor of consumers. But yesterday, SCOTUS ruled 9-0 that cases under the Telephone Consumer Protection Act, known as the TCPA, can be filed in federal court, not just in state court. The case, Mims v. Arrow Financial Services, involves annoying auto-dialed phone calls made by a debt collector to a consumer without his consent.

We’ve written about the TCPA on this blog before. The TCPA prevents harassing phone practices such as calling a cell phone with an automatic dialer and calling a home phone line to leave a prerecorded message. The law awards up to $1,500 in damages for each offending call.

If you are receiving robo-calls to your cell phone, or prerecorded messages to your home phone, get in touch.

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Posted in Debt Collection | 1 Comment »

Our most popular blog posts of 2011

Monday, December 12th, 2011

As consumer lawyers we like to know what kinds of issues are on our clients’ minds. So we took a look at our blog to see which posts got the most action. Below we run down the top five of 2011.

Can a second mortgage company sue after foreclosure? This was (by far) our most visited post of 2011. In the post we describe how second mortgage companies often wait a couple of years after foreclosure before they go after the homeowner for a deficiency judgment. They probably figure that there’s no point in trying to collect money from people who are in such dire straits. So it was no surprise, since the foreclosure crisis peaked around 2008-2009, that people were dealing with second mortgage companies two years later.

Can I run up my credit cards before filing bankruptcy? This was a popular question on the blog and in the office. And I know people don’t really mean that they want to go on spending sprees and then wipe the debt out in bankruptcy. The questions were more from people who had been living off their credit cards before coming to see us, and wanted to know whether they’d be cut off from credit right away. We advised clients to wean themselves off plastic, and to definitely avoid buying luxury goods and services before filing bankruptcy.

A debt collector is taking my paycheck–what do I do? Garnishment was a killer in 2011. You wanted to know how to get your money back from debt collectors who had taken money out of your paycheck or bank account. We told you about the garnishment exemptions. We told you about the new rule that protects federal benefits. And then we reminded you that if you file bankruptcy, any funds taken from you within the 90 days before filing had to be returned.

How much will my Chapter 13 payments be? One of our biggest trends in 2011 was a big uptick in Chapter 13 filers. A lot were people wh0 had used up every other option, and wanted to use Chapter 13 to catch up on mortgage payments. Others had heard about the magic of lien stripping and wanted to know if we could wipe out their second mortgage (for the most part, we could). But a big part of deciding whether to file Chapter 13 is to know whether the payments would be affordable. We spoke. You clicked.

The payday loan scam Finally, we told you about debt collectors who use nasty practices to collect payday loans that you probably don’t owe. We reminded you never to pay a debt collector without having the deal in writing. We also reminded you that debt collectors (even the ones collecting fake debts) need to follow the Fair Debt Collection Practices Act, and gave you some tips for stopping debt harassment.

The best part was when clients told us that they used our blog to figure out how to get out of a jam. What other topics should we be writing about in 2012? Leave your ideas in the comments.

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Posted in Bankruptcy, Debt Collection, Foreclosure, Levy/Garnishment, News | No Comments »

The payday loan scam

Wednesday, June 15th, 2011

Many of us, if we’re lucky, have been living paycheck to paycheck. Sometimes the paychecks don’t come soon enough and we’re forced to swim with the sharks of the payday loan industry. These loans are terrible for myriad reasons. For instance, the interest rates on these loans can be as high as 900%. No, that is not a typo. NINE HUNDRED PERCENT!!! This extreme interest can make it nearly impossible for struggling people to ever break free from the clutches of a payday lender.

The main issue I wanted to touch on today is what can happen in the months and years after you’ve paid off a payday lender. We’re getting a lot of calls lately from people who’ve received harassing phone calls. The callers claim that the individual owes a debt to a payday lender, though they rarely identify who the lender is. They then proceed to threaten that criminal charges are pending and the only way to avoid jail is to pay up immediately. Or they say they will send someone to the debtor’s residence to seize money or goods. Definitely a menacing prospect.

We think most of these calls are flat-out scams. The payday lenders have either sold their customer information to shady third parties or their data has been hacked. The callers often have a lot of information about the individuals, including their addresses and social security numbers. They often use this information to convince people of their legitimacy. They also prey on the fact that people who’ve used payday lenders in the past know from experience that these debts are difficult to pay off in full and that even a $1 balance can skyrocket quickly.

Whatever you do, don’t agree to pay these collectors over the telephone. Do not give them any personal information about yourself or any of your financial accounts. Demand that they tell you the name of the payday lender you allegedly borrowed this debt from and that they put their demand in writing and mail it to you. Also, take notes on the call. Write down the number they’ve called from and the name the caller gave you (99 times out of 100, this will not be his/her real name). Note whether or not they spoke the phrase, “This call is from a debt collector and is an attempt to collect a debt,” and make sure to write down any specific threats the caller made.

As soon as you are off the phone, we recommend contacting a consumer attorney or the state Attorney General’s office. If the call is a scam, either should be able to tell you that and advise you on next steps. If the call is an attempt to collect a legitimate debt, the caller may still have broken the law. The Fair Debt Collection Practices Act (FDCPA) governs the way in which debt collectors can conduct business. If they violate that law, you may be able to sue them for statutory damages, actual damages, attorney’s fees, and costs. We handle these cases all the time. If you think you’ve been the victim of anything like this, call us for a free consultation.

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Posted in Debt Collection, FDCPA | 1 Comment »

News Flash! Just Because You Heard It In An Advertisement Doesn’t Mean It Is True

Thursday, June 2nd, 2011

I’m not sure what this says about me, but I listen to a fair amount of talk radio and watch a bit of late night television. There isn’t a day that goes by where I don’t encounter an advertisement demanding my attention if I, “have more than $10,000 in credit card debt.” It goes on to tell me that, because the government bailed out banks and car companies, I am entitled to have my debt reduced by 50% or more.

You only have to make a small leap of logic for this to make sense. Things are tough. The government bailed out some industries, why couldn’t it help citizens struggling with debt? It might seem reasonable, but it frankly is not true.

The companies running these ads all try to create the appearance that they either are a part of the government or are sanctioned by the government. That isn’t accurate at all. They are for-profit debt settlement companies. They can’t help you take advantage of a mythical government program, but they may take advantage of you.

In our experience, the for-profit debt settlement industry is deeply flawed. There are some “companies” that are flat-out scams. They get you to pay their fees up front and then stop answering your calls when it is time for them to settle with your creditors. There are some legitimate businesses in this realm, but we’ve seen their methods fail time and again. Essentially, for these programs to work, your creditors have to never sue you and then be willing to accept a fraction of what you owe in satisfaction of your debts. This sounds great in theory, but rarely works out in practice.

If you’re finding yourself tempted by these ads, we recommend calling a reputable non-profit organization like Lutheran Social Services. Their program isn’t for everyone, but it is legitimate. Or you can always call us. We provide free consultations and will shoot you straight.

Posted in Debt Collection, Debt Settlement Companies, FDCPA | 1 Comment »

Why don’t these legal papers have a case number?

Friday, May 27th, 2011

Many of our clients get papers that appear to be legal papers, but don’t realize that they’re real because there’s no case number. Minnesota has some unique rules about how a lawsuit is started, and these rules tend to trip people up. Here’s what you need to know:

1. Why don’t these papers have a case number? In most other states, debt collectors have to file a case with the court before they can serve papers on the defendant. Minnesota state courts, on the other hand, have pocket filing. Pocket filing (also called pocket service) means that a case can be served on a defendant without being filed with the court. The case will have to be filed with the court eventually, but not to start a case. No case number is assigned until the case is filed.

2. Don’t ignore a lawsuit that has no case number. Just because there’s no case number, it doesn’t mean that the normal deadlines for a lawsuit don’t apply. When you’ receive a summons and complaint, case number or not, you have 20 days to respond. You do this by responding directly to the plaintiff’s lawyer in the case (the debt collector’s law firm) rather than responding to the court.

3. There can be serious consequences if you don’t respond. If you don’t respond to a pocket-filed lawsuit in time, the debt collector can get a default judgment against you–meaning that they win their case and they can try to collect the judgment. Lots of people come to see us who are having their bank accounts levied or their wages garnished and they can’t figure out why, since they didn’t realize they were being sued in the first place.

If you’ve received legal papers, contact us right away. 20 days to answer a lawsuit goes by very quickly, and we can advise you of your options before a debt collector can get a judgment.

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Posted in Debt Collection | No Comments »

We are NOT Central Prairie Financial, LLC

Friday, April 8th, 2011

We get a lot of notices of bankruptcy filings. This makes sense, because we represent people filing bankruptcy. Even though we’ve already received the same information via e-mail, we make a point of opening the letters and verifying that all the information is accurate. Then we fold up the letters into paper airplanes and play Red Baron in the office. It is often the highlight of our day.

Lately, we’ve been getting notices on bankruptcies that have nothing to do with us. We are neither the attorney of record, nor do we represent any creditors. It turns out we’re getting bombarded with mail because one particular creditor, Central Prairie Financial, LLC, doesn’t have much presence on the internet.

When you Google “Central Prairie Financial” what you’re most likely to see is one of our blog posts lambasting the practices of this “Laura Ingalls Wilder of the Debt Buyer World.” There appear to be some law firms out there who think that because we mention Central Prairie Financial that we are Central Prairie Financial, so they send their bankruptcy notices to our address. That is kind of like assuming that Fox News is the official mouthpiece of President Obama, because they say his name a lot.

I don’t mean to sound like I’m getting on the case of other bankruptcy attorneys. Central Prairie is very mysterious. All we really know is that they buy debts and hire local law firms to sue on them. Or maybe they are owned by those local law firms. It is very difficult to tell from online research. The one thing I have been able to determine is that they are registered as a Limited Liability Company in Delaware, which, last time I checked, was nowhere near the central prairie.

If you get sued by Central Prairie you can definitely call us, but please don’t address your birthday cards and holiday letters for them to our address.

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Posted in Debt Collection | No Comments »

Different time limits on store credit cards may protect consumers

Wednesday, March 30th, 2011

As we mentioned in another post, the statute of limitations for a credit card debt is six years in Minnesota. This means that a debt collector can only sue a consumer on a credit card debt within the six years after default on the card. Once six years have passed, there’s very little a collector can do to get the money.

Not very many people know that there is a separate, shorter statute of limitations of four years for store credit cards. This is because store cards are governed by the Uniform Commercial Code (UCC), a set of laws that govern installment sales of goods, among other things. So figure out whether the shorter limitations period applies, we need to figure out whether the card was a sale of goods (four years) or money loaned (six years). Some cards are tricky–for example, Walmart has both a store credit card and a Visa card. To figure out which limitations period applies, we ask the following questions:

Did the card have a Visa/Mastercard/Amex/Discover logo? If not, the four-year period may apply. If it’s been years since you cut up the card and you can’t remember whether there was a logo on it, we can generally use the card number to find out. Amex cards begin with the numbers “34″ or “37.” Visa cards begin with 4. Mastercard begins with 5. Discover begins with “6011″ or “65.” If the account number began with any other numbers, it most likely was a store card.

Did you apply for the card at the cash register? If you did, it’s easier to argue that you bought goods on installment and therefore it was a store card. If you applied for the card from home, it may be more likely that it was a credit card.

Could you take a cash advance on the card? Store credit cards don’t allow you to take cash advances. Credit cards generally do. If you couldn’t take a cash advance, the four-year period may apply.

If a collector has sued you after the end of the limitations period, not only is it a defense to the lawsuit, but in some cases it is a violation of the Fair Debt Collection Practices Act if they knew that the debt was too old to be sued on. A good consumer lawyer should understand how to fight these zombie debts and may be able to help you recover damages. If you think you’re being sued on a store credit card, give us a call for a free case evaluation.

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Posted in Debt Collection, FDCPA | 3 Comments »

New rule protects federal benefits from bank levies

Wednesday, March 9th, 2011

Starting May 1, 2011, banks will no longer be able to turn over some federal benefits held in their accounts to creditors. Previously, when a creditor got a bank levy against a consumer, they could take all the funds in an account, and the consumer would have to use a time-intensive process to claim a state or federal exemption to get the funds back. But in the meantime, the consumer could not access that money.

The new rule issued by the U.S. Treasury Department will require banks to check, before turning funds over to a creditor, whether federal benefits (Social Security, SSI, VA benefits, etc.) were deposited into the account within the previous two months. If so, the banks will not be able to send those two months of federal benefits to the creditor. The new rule does not apply to garnishment by a child support agency.

In addition to the new protection, money not protected by the new rule may still be protected under state law. Consumers will still need to fill out the exemption notice for exempt benefits beyond the ones covered by the new rule.

One very important note–this new protection will not apply to federal benefits deposited by paper check. To get the protections, a recipient must sign up for direct deposit or a Direct Express card. Also, the protection wil not apply to funds transferred to another bank account. So if you receive the money in your checking account, and transfer it to your savings account, it is no longer protected by the new rule.

If your bank account is being levied, give us a call.

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Posted in Debt Collection, Levy/Garnishment | No Comments »

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