|Posted on April 6, 2015 at 6:00 PM|
Payday loans. You may have heard a lot about them in the news lately. They are often used as a temporary stop-gap means of making ends meet for many Americans. While most people who utilize this form of short-term loan usually understand that they are not entering into a good deal, few realize just how raw of a deal they are getting.
In Alabama, cash advance or payday lenders will lend their customers a small amount of money, usually just a few hundred dollars, with a promise to repay the loan plus fees and interest within 14 or 30 days. If the entire amount is not paid, the loan can be partially repaid and once again “renewed” for another 14 or 30 days. For anybody who does not have the ability to repay that amount in the time allowed, which is most people who utilize this service, they remain stuck in the endless cycle of debt. Then, what started out as paying back a relatively “small” amount on top of the initial loan amount turns into a perpetual cycle of repaying hundreds each month.
Under state law, these loans can top out at 456% APR, or annual rate of repayment when considering the fees charged. These fees reveal themselves as truly hideous when compared to other returns seen by other lenders such as credit cards, which top out at less than 30% APR. The situation is even worse considering that a large percentage of borrowers often carry more than one $500.00 payday loan at a time, even though this is against state law.
Payday loans have made news recently for a few reasons. The Alabama State legislature has been looking at the issue and debating whether to enforce laws already on the books relating to them. Under current state law, a payday loan borrower may only take $500.00 in such loans at a time. The problem with this is that there is no statewide database to track them. As a result, payday lenders can bury already struggling Alabamians under even more debt (or allow Alabamians to bury themselves under even more debt, depending on your point of view).
Even more recently, the President came to Alabama and made payday loans the centerpiece of his Birmingham speech last month. While here, he argued for more Federal oversight of the payday loan industry. While that may or may not be a wise idea, certainly some action is needed to curb the excessively oppressive nature of this legalized racket here in Alabama. Right now, the matter of a centralized database being created is working though the Alabama courts. Pending the final outcome of an appeal by the payday lending industry we should have a statewide database up and running to allow for the enforcement of current state law on the matter.
In the mean time, please take this advice: don’t get into the revolving door of payday loan debt. It is easily the most destructive debt one can incur, with the possible exception of student loans. If you are in a situation in which you need a short term loan, seek out assistance from a family member, a friend, or your Church. You will find that people are surprisingly willing to offer a hand to those in a fix.
As a last resort, consult a bankruptcy attorney before going to a payday lender. Even if filing for bankruptcy relief is not the best option for you, we may be able to come up with an alternative to the payday loan option.
- Kenneth Elmer
|Posted on October 2, 2014 at 1:25 AM|
If you are an American living in the 21st Century, you have probably had a moment when you are struck by just how much of your disposable income is devoted to paying on your monthly debt bills. Like so many others, you may have recently confronted the fact that paying the monthly minimum due on your high interest credit card bills is getting you nowhere fast.
The greatest problems with credit cards are their easy access and universally high interest rates. When you see something you want, it can be far too easy to open your wallet and charge it. Or you may be in a short term bind of being out of cash and an expense needs to be paid, and paying it on a credit card is the only option you have other than not paying at all. Either way, you have just had the hole you are in dug even deeper.
There are several ways that any “expert” can tell you to deal with your credit card debt. You can make a household budget and earmark every dollar coming in for a particular purpose. You can pay down your debts by tackling the credit card with the highest interest rate first and work your way through progressively over many years. You can even try and smartly borrow money from a low interest source such as a retirement loan on your 401(k). The problem is however that sometimes there is just no way that you can truly get a grasp on a sizable credit card problem. This is especially true when you have a stagnant or declining income and daily living expenses are rising, a problem facing us all as a Nation right now.
If, given your income, you have reached the point that there is just no real way for you to solve your credit card predicament you can first try to settle the debt with the credit card companies. This is often easier said than done however, because most any settlement that the credit card companies will agree to will involve a large up front payoff frequently being more than 50% of what is owed on the card. Chances are that if you had that kind of money available to you, you would not be in the situation you face. If a repayment plan is reached with the credit card company, you may be able to afford that repayment if it was all you were obligated on. However for those who have 2, 3, 4 or more cards with high balances (along with whatever other debt burden you have) this often does not fix your problem as a whole. If you are in a position to pay off a sizable part of a single aggressive creditor, hiring an attorney to help you negotiate and arrange the best terms is advisable. I will talk more about this in an upcoming entry.
Finally, if attempting to settle with your credit card companies fails you can find yourself facing a lawsuit filed against you. If you are dealing with a debt collector for a credit card company you may be in the even worse position of never having even been properly served with the lawsuit in the first place. In this situation, consumers only discover the problem when their paycheck is garnished up to 25% when they had not even known that had been sued. This is the nightmare situation that millions of Americans are finding themselves in with the explosion in the number of disreputable debt collectors which have sprung up since the Great Recession.
If you find yourself anywhere along the credit card debt path described, it is not too late to deal with it. While you do not want to find yourself suddenly or unexpectedly with a paycheck or bank account being garnished, filing for bankruptcy protection even at that late stage could be your best option. It is always going to be to your advantage to deal with the problem you face before you get to the point of garnishment. By speaking with a consumer bankruptcy attorney in the Tuscaloosa area, you can find out what your options are to avoid the stress of dealing with these types of problems for years on end. You can even avoid or stop a garnishment, but the first step is to call for a free consultation to review your options.
|Posted on August 13, 2014 at 9:20 PM|
Well this has been a busy Summer for us here at the Elmer Law Firm, and I am sorry I haven't gotten any new posts up lately. The simple answer to this question is yes, you need to contact your attorney anytime there is a significant change in your financial world. While this may sound like common sense to you, it is easy enough to overlook or forget about. Some common examples of events which you should always notify us about while you are in an active bankruptcy are:
• Changes in your address;
• A car accident occurs, even if you are unhurt;
• A relative passes away and you think there is a possibility that you could receive an inheritance or life insurance payout at some point;
• You want to refinance your car or your house;
• You want to sell a vehicle (even a paid for car);
• You need to buy a new vehicle;
• You need to take out a student loan;
• You get a new job, or
• You win the lottery or are about to receive any type of a windfall.
The above list is rather lengthy, but the toughest thing about it is that it is not a complete list. In actuality, there are any number of things which can arise in life which could potentially affect your bankruptcy case. While you are in bankruptcy you have an obligation to report any material change in your circumstance to the court. While something that happens in your life may not be something that gets submitted to the Court, I do need to at least be aware of most of these types of life events so that I can be sure you remain in compliance with the law.
Because bankruptcy law is complicated, I always tell my clients that anytime they have something pop up in life, they should ask themselves “Is this something my attorney will want to know about?” Its pretty simple advice, but if you ask yourself this and answer honestly you will likely stay out of trouble with the Court and have a successful case and make the most of your fresh start. On top of everything, we always want to keep in touch with our clients and see how you are doing. Never hesitate to call us, even if its just to say hello!
|Posted on March 28, 2014 at 5:35 PM|
The answer to this question is that it depends. It will depend on several factors, including what chapter of bankruptcy you file, how large your refund is, and the timing of your bankruptcy filing.
For those who are filing a Chapter 7 bankruptcy it can actually be a little easier for you to keep your tax refund than in Chapter 13. The reason being is that you can exempt, or protect that refund just like any other asset. The refund is considered an asset just like your house, your furniture, or money in the bank. And because when you file Chapter 7 bankruptcy you are saying to the Bankruptcy Court that you cannot repay your creditors back, anything which is not exempted becomes property of the estate and distributed to creditors. The bad news is that in Alabama you are only allowed to exempt $3,000 of personal property. The good news is that most people are able to exempt all of their personal property under the law. A tax refund however, especially a large one which you are still owed, is going to be very difficult to protect entirely from the Trustee.
For those who are instead looking to file a Chapter 13, things work a little bit differently. Instead of the Trustee who oversees your case looking to directly take your tax refund if he can do so, he is looking to make sure that you pay that refund each year into your case to your creditors. So while you will receive your refund from the IRS, this amount is already going to be factored into your income and forms the basis as to what you monthly payment is going to be. An altogether separate issue is whether your tax refund may be intercepted by a governmental creditor such as for taxes owed to the IRS or for student loans or child support owed.
There are several ways that you can act to protect the most you possibly can of your tax refund. First, if you are looking to file a Chapter 7 bankruptcy make sure that you are wise in the timing of filing your case (especially around tax season). If it is the end of the year through the beginning of the year, make sure that your attorney exempts as much of that refund as possible. If you can wait until after tax season, you can spend the refund that you have already received on living expenses. That way there is no refund for the trustee to take. You must be very careful in how you spend your refund however, and can create a large amount of trouble for yourself if done improperly. Please speak with a competent bankruptcy attorney before doing so.
Second, you can adjust your withholdings out of your paycheck each month so that the government doesn’t take so much to begin with. This way you will not receive as large of a refund and you can better protect what you do receive. This is particularly useful to do if contemplating filing a Chapter 13 bankruptcy.
This entry is the second in my 2014 tax season series on all things taxes. Check back soon for part three.
|Posted on March 24, 2014 at 3:40 PM|
With the warm weather and return of the sounds of wildlife returning, that means that Spring is here. And with Spring, soon comes April 15th and Tax Day. This time of the year often makes many people nervous, particularly those who know or fear that they may owe some money to their Uncle Sam. This can be a particularly real fear if you have done any number of things that so many people have done in these tough times without ever thinking of the tax consequences. You may have been forced to make an early withdrawal out of your retirement account, or received a small inheritance from upon friend or family member’s passing. While you may have made the most of these types of moneys, you may have forgotten that the government will be standing there with open hand, ready to take its share.
If you have this or any number of similar situations, you may be wondering if bankruptcy could be helpful in handling this particularly large creditor, the U.S. Government (or the State of Alabama for that matter). While these situations can often be extremely complicated, and many talented lawyers go to school for an additional year or two after law school to gain another degree dealing solely with this issue, there is a helpful rule of thumb. If the income tax debt owed is for a tax year more than three years old, it is probably going to be dischargeable in bankruptcy. This means that if you file a Chapter 7 bankruptcy on April 20, 2014 and you owed the IRS $10,000.00 in back taxes, (including penalties and interest, from tax year 2010 (for which a tax return was due by April 15, 2011 unless you applied for an extension) then there is a strong possibility that the debt would be discharged. This is the case in Chapter 13 as well.
There are always exceptions however. You may have a situation in which the tax debt is older than three years, but there may be a tax lien filed by the IRS or State government on your property. This adds to the complexity of the case and limits what may be discharged by a bankruptcy. There is also a potential for the IRS or State to have recently “assessed” your tax debt, which adds an additional period of time during which the debt cannot be discharged. It is precisely because of the complexity touched upon here that if you do have a tax debt that you owe that you speak with a competent bankruptcy or tax attorney. But the bigger takeaway for you is that if you know or suspect that you owe a tax debt, it is important that you seek professional advice. Your tax debt can be dealt with, and this time of the year is the best time to address this type of problem head on.
Call or email the Elmer Law Firm today to speak with an experienced bankruptcy attorney about your tax debt today at (205) 286-8111, and schedule a free consultation to talk about your options.
|Posted on January 16, 2014 at 2:20 PM|
Yes, you can. A debtor may, at any time, convert (or change) their Chapter 13 bankruptcy to a Chapter 7 so long as they have not already converted from another chapter, without court approval. If your situation since you have filed your Chapter 13 has changed enough, you may find that it is no longer practical to remain in it. You may have had a drop in income, change in family circumstances such as a divorce or death of a spouse, or you may have accrued additional debt such as medical bills from a serious illness.
Whatever the case may be for you, if you decide that want to find out what a conversion to a Chapter 7 in your case may look like, you need to contact your attorney as soon as possible to schedule a meeting. Only your attorney can properly evaluate your situation and tell you exactly how a conversion would impact you and your property.
The first step in making the determination of whether converting would be in your best interests, is whether you qualify for a Chapter 7 discharge or not. While it is your right to convert to a Chapter 7, you still must qualify by passing the Means Test just as any other filer would be required to do so. This means that you will need to give your attorney the most recent 6 months of your paystubs, as well as those of your spouse. If you pass the means test, Mr. Elmer will schedule a final meeting to discuss any other matters pertaining to your case before converting it.
Keep in mind that a discharge received in Chapter 7 is different than a discharge received under Chapter 13, and is not quite as broad as to the debt which is done away with. Several types of taxes as well as back owed child & spousal support are not discharged under Chapter 7. Also, think back to why you filed Chapter 13 in the first place. You may have filed it so as to pay for a car, catch up a mortgage, or because you owned too much property outright. All of these, and some other factors, will need to be considered as you make your decision. That is why it is important for you to have a competent and experienced bankruptcy attorney in the first place.
|Posted on November 26, 2013 at 12:50 PM|
Yes. As we head into the Thanksgiving and Christmas seasons, many people turn their thoughts to friends and family. And if you owe money to those you love, you may begin to think about how you can protect them before you begin to consider contacting a bankruptcy attorney. While this is certainly a noble and understandable thought, it is not in either your best interests or those of your loved one, for the following reasons.
You do need to list all of your debts in your bankruptcy schedules, as required by federal law. This is not as bad as it may seem at first to those of you who are concerned about this however. Just because your friend or family member is listed as a creditor, does not mean that you cannot repay them. Nothing in the law states that you cannot voluntarily repay a debt discharged in a bankruptcy. All you need to do is let the friend or family member know that you were required by the law and your attorney to list their debt, but you will continue to repay it when your case is over. This same advice holds true to a doctor or anyone else close to you with whom you want to maintain a good working relationship.
For those of you who still want to avoid this situation however by just paying your friends/family back before you file bankruptcy, this too is not recommended to do. Any payments to creditors in the year before filing your bankruptcy are scrutinized as a potential “preference.” All this means is that the court and your trustee will be looking for any creditors who received payments which amount to one creditor being “preferred” over your other creditors. If this has happened, your trustee will be able to sue your friend or family member in bankruptcy court to recover the money you paid them back. This would surely be a worse situation than simply explaining to your family that you will repay them the debt after your case is over.
So at the end of the day, not only is it a bad idea to try and repay a friend or family member ahead of your bankruptcy, it can create extra headaches for both you and the person you are trying to protect by repaying them. Always talk to your attorney first before making any large, out of the ordinary repayment of debt to anyone, but especially friends and family. And to all those reading, have a Happy Thanksgiving!
|Posted on September 24, 2013 at 12:00 AM|
Many of my clients who first come in to see me have been struggling with their debt for some time. Some for half a decade or longer. When I have a client who has a second mortgage on their home from back in the days when property values were rising each year, most of the time that second mortgage is no longer secured by equity in the property. In other words, their first mortgage is for more than the entire property is currently worth. Some clients ask if something can be done about that and some aren’t even aware that anything could ever help in that situation.
When this situation presents itself however, we do have tools at our disposal to deal with it. Historically, at least for those who reside in the Northern District of Alabama, Chapter 13 bankruptcy has allowed these underwater homeowners the ability to “strip off” these wholly unsecured second mortgages. Unlike the first mortgage of your primary residence, which is specially protected from modification under the Bankruptcy Code, a second mortgage meeting this requirement can be modified.
So what does this mean for you? It means that through a Chapter 13 bankruptcy, that second mortgage under these particular circumstances can be stripped of its secured status, and paid back at the same rate as your other unsecured creditors. And if your case turns out as a typical repayment plan, this means that a second mortgage amounting to tens or even hundreds of thousands of dollars will instead share from the few thousand dollars, or possibly less, that your medical bills and credit cards will receive. This action alone could save you hundreds or possibly thousands of dollars each month.
While there historically has not been this ability to “strip off” a wholly unsecured second mortgage in a Chapter 7 bankruptcy, recent case law here in the 11th Circuit (the federal court jurisdiction comprising the states of Alabama, Georgia, and Florida) has opened up the possibility of allowing it there as well. While this is a new and unsettled area of law here in West Alabama, it is an option that can be explored on a case by case basis for the time being.
Overall, this tool is a very complicated area of bankruptcy law and it is not open to everybody’s situation. But it is one of the most powerful and consequential tools available to homeowners facing serious financial circumstances. If you believe that your home may fall into this category, call to schedule a free consultation today at 205-286-8111 to discuss your situation with an experienced Tuscaloosa bankruptcy attorney.
|Posted on August 29, 2013 at 6:50 PM|
Today’s entry is the first part in a new series of frequently asked questions. These are questions that lots of people ask and often times need only a brief answer. One of the most frequent questions that I get asked by new clients wanting to file a Chapter 13 bankruptcy is what happens if they were to unfortunately lose their job. In this economy, that is certainly a legitimate concern.
What I tell my clients is that if you or a spouse loses a job and miss a payment is that you first need to get on the telephone and schedule an appointment to meet with me as soon as possible. You should do so even before you miss that first payment, and do so as soon as you know there is going to be a problem. If you miss even a single payment into your case it can adversely affect the outcome. The more payments you miss, the worse the risk of the case failing. Because of this, you need to let me know exactly what is going on, so that together we can come up with the best method of dealing with the setback.
The first option we have is to file a motion with the Court asking your judge to suspend your payments for a short time while you find another job. If you think you will have another quickly, hopefully we can request a short suspension of only a month or two, which may not result in your plan payments going up very much or at all. This will depend entirely on the facts of your particular case however.
The second option we have is to file a motion requesting the Court’s permission to extend your case longer than it currently is set to be. So if you filed your case as a 36 month case, we can suspend your payments for a short period and then extend the case’s length so that you can keep your payments at the same amount. This is not always possible, but it is another option that we can review in this type of situation. We also cannot ever extend a case beyond 60 months.
All of this can be boiled down however to say that you must keep us informed at all times if you have a job loss or pay cut or some other event that affects how much or even whether you can pay into your Chapter 13 bankruptcy case at all. We can handle bad news when it happens to you, and take action to minimize its impact on your case. But when you don’t keep us in the loop and let a bad situation drag on without dealing with it, client’s cases suffer. The worst thing that you can do is simply stop making payments into your case and not let us know about it. Just remember that when you hire us to represent you in a bankruptcy, we are here to shoulder the burden with you. But we need your help to give you the best representation that we can.
|Posted on July 18, 2013 at 1:05 PM|
If you have filed a Chapter 13 bankruptcy, the first thing that you will want to do is make your first regularly scheduled payment into your case. If you are being payroll deducted, look at the first paycheck you receive after you have filed and see if your employer has deducted your plan payment from it. If not, you will need to make that payment directly to the trustee. You may do so by cash payment at the trustee’s office, or via mail by money order or cashier’s check. If you elect to pay with a money order or cashier’s check, make sure to include your bankruptcy case number on it. These payments may be mailed to the Chapter 13 Trustee for the Northern District of Alabama, Western Division (C. David Cottingham) at the following address: C. David Cottingham, Chapter 13 Trustee, P.O. Drawer 020588, Tuscaloosa, AL 25402. Mr. Cottingham’s website with more information can be found at www.ch13tuscaloosa.com.
Once the payroll deduction has started, you will no longer need to make these direct payments to Mr. Cottingham. But until that deduction starts, it is very important that you make the payment directly so that you do not fall behind in your case, and possibly even have it dismissed without a discharge.
If you elect to directly pay your entire case and not be payroll deducted, the burden is placed directly on you to make sure your payments are received timely by the trustee. Paying directly lowers your chances of successfully completing a Chapter 13 case, and I almost never recommend doing so if you or your co-filing spouse have a job. In addition, paying an additional fee just to purchase a money order is not the wisest use of your money.