Author Archives: Ryan C. Wood

About Ryan C. Wood

Ryan C. Wood is a California attorney practicing primarily in the areas of Bankruptcy Law, Business Law and generally seeking justice for under represented clients in the Bay Area.

Payday Lender Disciplined for Illegal Practices

By Ryan C. Wood

Time and time again our clients show us outrageous contracts from payday lenders. I have seen contracts with APRs from 200%-300% and even one contract that had an APR of over 1,600%. Our clients know the APRs are ridiculously high and yet there are no other options for them at the time. Some of our clients are living paycheck to paycheck and if something unexpected comes up such as a medical emergency or car repair they need short-term cash. The payday lenders know that and charge them outrageously for this help. If the borrowers are unable to pay back the loan the phone calls and collection activity begins. Some lenders follow the law, but a lot of them do not. We have clients calling us crying because debt collectors are threatening to throw them in jail for not being able to pay a payday loan. The Consumer Financial Protection Bureau, (Who?) is taking a steps to stop the payday lenders from taking advantage of consumers. The Consumer Financial Protection Bureau (CFPB) was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2011. This Act was passed in response to the greed and dishonest business practices of real estate agents, appraisers and mortgage companies in the financial crisis of 2007 and 2008.

On November 20, 2013, the CFPB in In re Cash America International, Inc. File No. 2013-CFPB-0008 signed an order in an administrative proceeding that found Cash America International Inc. violated several laws. Cash America has many subsidiaries and affiliates. One of them is Enova. Enova provides pay day loans to consumers under the name CashNetUSA. Another subsidiary and affiliate is Cashland Financial Services, Inc. (“Cashland”) The CFPB notified Cash America that CFPB would be conducting an examination of their company for a specific period (July 1, 2011, to June 30, 2012). CFPB informed Cash America to keep all records and they should not destroy any documents. When CFPB visited Cash America and Enova’s offices, CFPB found that Enova shredded documents even after CFPB’s letter specifically telling Cash America and Enova not to shred any documents. CFPB also found that Enova did not keep any records of their incoming or outgoing calls to consumers. CFPB also found that Cash America and Enova told their employees to de-emphasize the “sales” aspect of their jobs and turned off the auto-dialer that made automatic outbound marketing calls to consumers.

CFPB also found that Cashland’s collection activities were unfair and deceptive because the employees were manually stamping and notarizing documents and state court proceedings without the manager’s review of the documentation and did not follow the procedures required by law. This practice caused consumers to pay potentially incorrect amounts or had to spend their own money in court costs to defend themselves in court against the lawsuits. Some went to see bankruptcy lawyers because there was no way for them to repay the amounts listed on the lawsuits since they included the original debt plus interest and penalties. Cash America has refunded approximately $6.4 million to consumers that were affected by these frauds. The CFPB ordered Cash America to provide another $8 million to continue refunding consumers that have been affected by these unfair and dishonest practices.

Additionally, CFPB found that Cash America violated the Military Lending Act by charging active military members more than 36% to lend them money (as a bankruptcy attorney, I have seen most of these pay day loans contracts had APRs of 200% or higher).

CFPB ordered Cash America to cease and desist in all unfair and deceptive practices and illegal conduct. CFPB also ordered Cash America to set up rules and procedures in place that would comply with CFPB’s orders and to set up education and training courses for employees. Cash America was also fined $5 million in civil penalties for their practices.

Unfair Collection Methods and Violations of the Fair Debt Collection Practices Act

By Ryan C. Wood

I received a very disturbing call the other day from one of my clients. She essentially told me a collection agency called her and told her there would be a warrant issued for her arrest if she did not pay her outstanding debt. The collection agency said the warrant was for issuing a bad check. My client was confused because she did not write any bad checks, but at the same time she was scared because the collection agency was very convincing and the representative was spewing all the “legal mumbo jumbo” (her words) at her that she did not understand. Instead of contacting us, her bankruptcy attorneys, she called all her family members and friends and paid most of the amount owed to the collection agency because she was afraid that she would be sent to jail. Does this sound familiar to you? Unfortunately this sounds very familiar to us. We have even heard worse stories than this. We have heard of collection agencies calling parents of people that owe money and threatening to send their children to jail because their children did not pay their debts. The parents of course want to do anything they can to prevent their children from going to jail so they pay the collection agencies. Collection agencies prey on people who do not know the law and scare them into paying their debts even when they cannot afford to make the payment. This is what the Fair Debt Collection Practices Act (“FDCPA”) seeks to prevent.

The FDCPA was enacted by Congress to ensure that debt collectors collect their debts in a fair manner. The FDCPA ensures that debt collectors do not step over the line with harassment and unethical practices. Under the FDCPA, debt collectors are prohibited from calling you any time before 8:00 a.m. and after 9:00 p.m. in YOUR time zone. It doesn’t matter what time zone the debt collector is calling you from. Debt collectors cannot call anyone other than you to collect the debt from you. That means they cannot call your parents, your siblings, or your friends unless you give permission for them to do so. If they do contact your relatives or friends the only thing they can do is ask how they can contact you. They cannot tell anyone else that you owe them any money. They cannot lie or use deceptive or misleading statements to you in an attempt to collect the debt. They cannot use unfair practices against you (such as threatening to put you in jail or to take away your possessions if they cannot legally do so).

Communication

If you tell a debt collector you have a bankruptcy lawyer the debt collector cannot contact you any further. All communication from that point on has to be through your legal counsel. If you tell the debt collector (or if they reason to believe) that they cannot contact you at your work because it is against work policies to receive personal phone calls the debt collector must immediately stop calling your place of employment. Another gem that most consumers do not know about is if you send something to the debt collector IN WRITING that you refuse to pay the debt or that you want them to stop contacting you, the debt collector can no longer contact you unless it is to tell you that their efforts to contact you will stop or to let you know they are proceeding with certain remedies against you (for example, if they are going to sue you).

Harassment

The FDCPA forbids debt collectors from harassing you when they call you. That means they cannot yell at you, curse at you, threaten you, use obscene language, or annoying you by constantly calling you. When the debt collectors call you they have to tell you who they are and where they are calling from. I have heard of clients receiving harassing phone calls from people that use abusive language and refusing to state where they are calling from. You do not have to take such abuse.

If your debt collectors violate the FDCPA you have a remedy against them: you can sue them for civil liability under 15 U.S.C. 1692k. One caveat: in order to be liable under the FDCPA, the debt collectors generally have to be a third party collection agency. They are generally not the original creditors. For example, if you owe money to Chase, Chase is not a debt collector. They are the original creditor. Certain states may have their own state laws against unfair and deceptive collection activities though. California has the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) which mirrors the Fair Debt Collection Practices Act. However, in California’s Rosenthal Act, original creditors can be held liable if they do any of the prohibited acts.

What Happens if I Receive an Inheritance During my Chapter 13 Bankruptcy Case?

By Ryan C. Wood

If you become entitled to receive an inheritance during your bankruptcy case the inclusion of the inheritance into your bankruptcy estate depends on what chapter of bankruptcy protection you are filing under. Becoming entitled unfortunately someone close to you passed away after your case was filed. If you are entitled to receive an inheritance within 180 days of filing a Chapter 7 bankruptcy case the inheritance will be included into your bankruptcy estate. Please note this is if you are entitled to receive the inheritance within this time frame. This means that someone passes away and leaves you with an inheritance. You must contact your bankruptcy lawyer and/or the Chapter 7 trustee and inform them you have become entitled to an inheritance. It does not mean that you actually have to receive this inheritance during this time frame as a lot of times it takes at least several months or even years to actually receive the inheritance. If you are entitled to receive the inheritance 181 days after the filing of your Chapter 7 bankruptcy petition it is not part of your bankruptcy estate and you can receive the inheritance free and clear from your creditors pursuant to the discharge in your Chapter 7 case.

What About in a Chapter 13 Bankruptcy Case?

So what happens if you are entitled to receive an inheritance during a Chapter 13 bankruptcy case? Different jurisdictions may have different outcomes so you need to consult with a bankruptcy attorney in your area to see how your inheritance will be treated. In a recent Fourth Circuit appellate case, Carroll v. Logan (In re Carroll), No. 13-1024 (4th Cir, October 28, 2013), the court decided that inheritances acquired after the 180 day period but before the bankruptcy case is closed becomes part of your bankruptcy estate.

In the Carroll case, Mr. & Mrs. Carroll filed for Chapter 13 bankruptcy protection in February 2009. They were complying with the terms of their Chapter 13 plan and made the Chapter 13 payments. In December 2011, Mr. Carroll’s mother passed away. Mr. & Mrs. Carroll notified the court in August 2012 that Mr. Carroll was anticipating an inheritance of about $100,000. The Chapter 13 trustee moved the court to modify the Carrolls’ Chapter 13 plan to include the inheritance. The bankruptcy court agreed with the trustee and the Carrolls’ appealed the case to the 4th Circuit. The 4th Circuit states that 11 U.S.C 541(a)(5) includes interest in property that bankruptcy filers are entitled to acquire within 180 days (of the filing of the bankruptcy case) received by bequest, devise, or inheritance. The court then went on to state that 11 U.S.C. §1301(a) expands §541 by indicating that all property indicated in §541 that is acquired after the case is filed but before the case is closed, dismissed, or converted to a case under Chapter 7, 11, or 12, whichever occurs first is also part of the bankruptcy estate. The 4th Circuit concluded this meant that since the Chapter 13 bankruptcy case was not closed, dismissed, or converted, the inheritance was part of the bankruptcy estate and therefore can be used to repay the creditors.

We understand that the passing of a loved one is very traumatic and may sometimes be very unexpected. If you are filing for bankruptcy you should know if you are listed as a beneficiary in anyone’s will, trust, life insurance policy, or other instrument. The inheritance you may potentially receive may be in jeopardy depending on your circumstances.

How Can I Get My Chapter 13 Plan Confirmed?

By Ryan C. Wood

If you are filing for Chapter 13 bankruptcy protection you must also file a Chapter 13 Plan. The Chapter 13 plan will tell the court and all interested parties (such as the Chapter 13 trustee and your creditors) what you intend to do in your Chapter 13 case. The plan will provide for how long the Chapter 13 bankruptcy case will last, if you are reducing or “cramming down” the secured debt of a car to its fair market value, if you plan on stripping a junior lien on a house, if you need to pay back mortgage arrears, whether you are surrendering the collateral of a secured debt (such as a house or car), what percent your unsecured creditors will be paid and anything else you want to have done in your Chapter 13 reorganization case.

Your bankruptcy attorney will be working with the Chapter 13 trustee to make sure that your plan is confirmable (approved). It is the trustee’s job to take your Chapter 13 plan payments and disburse the funds according to the terms of your Chapter 13 plan. If there are issues with the plan payment, secured debt amounts, interest rates, payment percentages to the unsecured creditors, or any other terms of the plan, the Chapter 13 trustee will object to the confirmation/approval of your plan. Any of your creditors may also object to the confirmation of your plan as well if they do not agree with the terms you set forth in the plan. You may amend your Chapter 13 plan prior to confirmation if you need to change some of the terms, such as if the value to a car needs to be changed (based on negotiation between your bankruptcy lawyer and your car lender), or the amount of mortgage arrears (missed payments) is different than what is listed in the plan. If all issues are resolved with your creditors and trustee, the trustee can recommend to the court that your Chapter 13 plan be confirmed. The Chapter 13 plan you file with the court is only “proposed” until the bankruptcy court confirms/approves your Chapter 13 plan.

Once your Chapter 13 plan is confirmed you need to comply with the terms you set forth in the proposed Chapter 13 plan. Pursuant to 11 U.S.C. §1325, the bankruptcy court will confirm your Chapter 13 plan if: 1) it is proposed in good faith, 2) you are able to make all the payments proposed in the plan, 3) your unsecured creditors receive as much in your Chapter 13 plan as they would have if you filed a Chapter 7 case, 4) your secured creditors accept their treatment in your plan, 5) you file all applicable tax returns as required before your meeting of creditors and on time every year thereafter, and 5) if you comply with the terms of the plan.

One of the biggest factors in the determination of whether to confirm your Chapter 13 plan is feasibility. The Chapter 13 plan needs to be feasible or reasonably possible. In other words, you need to have the ability to pay what you propose in your plan. One example is if your plan proposes to pay $400 a month in your Chapter 13 plan but you only have $100 available after paying all your necessary expenses such as rent/mortgage, utilities, food, gas, insurance. How can you pay $400 a month in a plan if you only have $100 left over each month? The plan will be denied confirmation because it is not feasible or possible. To show that the plan is feasible you have to prove that the plan has a reasonable likelihood of success. One of the ways you can do so is to show that your income and expense schedules (Schedules I and J) provide the necessary disposable income to pay the Chapter 13 plan payment. For the example above, your plan may be feasible if your Schedules I and J reflect a disposable income of $400 to pay your Chapter 13 payment. Note that the plan only has to show that it has a reasonable likelihood of success. It does not have to prove that the plan is guaranteed to be successful. In re Anderson, 18 B.R. 763, 765 (Bankr. S.D. Ohio 1982). The bankruptcy court’s determination of feasibility should be based upon the facts before the court at the time of confirmation rather than hypothetical scenarios. In re Anderson, 18 B.R. 763, 765 (Bankr. S.D. Ohio 1982).

Another important factor in the determination of whether your Chapter 13 plan can be confirmed is the good faith requirement. Good faith is looked at on a case-by-case basis and takes all factors into account. You want to be sure that all your creditors are being treated fairly and that you are paying all of your disposable income into the plan.

In conclusion, if you propose a plan that satisfies the Chapter 13 trustee and the creditors, you can afford to pay the monthly payment every month, your creditors are being treated fairly, your case was filed in good faith, and you comply with the terms of your Chapter 13 plan, you will have a high likelihood of having your Chapter 13 plan be confirmed.

What is “Cause” to Lift the Automatic Stay in my Bankruptcy Case?

By Ryan C. Wood

There are many reasons people may want to file for bankruptcy: stopping a pending foreclosure, stopping a wage garnishment, stopping a lawsuit, or trying to get out from all their crushing debts to obtain a fresh start to name just a few. There are many more reasons than these as to why people file for bankruptcy. There is one powerful tool in the bankruptcy arsenal that accomplishes all of the actions named above: the automatic stay. The automatic stay is what stops a creditor from collecting from you, contacting you, continuing lawsuits or wage garnishments against you. The automatic stay freezes all collection activity against you as soon as your bankruptcy lawyer files your petition for bankruptcy relief. Obviously your creditors are not the biggest fan of the automatic stay if they are trying to collect from you. Their objective is to lift the automatic stay so they can continue their collection activity. How do they get the automatic stay lifted as to their debt?

Under 11 U.S.C. §362(d)(1) of the Bankruptcy Code, one of the ways in which a creditor can obtain a relief from stay order from the bankruptcy court is “for cause, including the lack of adequate protection of an interest in property…” What is considered “cause” for the judge to grant relief from stay to the creditor? It would be easier if Congress set out an exact definition on what is considered “cause” to lift the automatic stay, but since Congress did not do that, “cause” is determined on a case-by-case basis. See Delaney-Morin v. Day (In re Delaney-Morin), 304 B.R. 365, 369 (9th Cir. BAP 2003). Everything depends on the circumstances. The party seeking to preserve the automatic stay has the burden of proof. See Ellis v. Parr (In re Ellis), 60 B.R. 432, 435 (9th Cir. BAP 1985).

One of the circumstances that judges grant relief from stay for “cause” is the lack of proof of current insurance on the property. Proof of insurance is normally under the terms of a deed of trust. Failure to maintain insurance is cause to lift the automatic stay because it does not provide the creditor with adequate protection of its collateral. If anything happens to the property there would be a huge decline in property value and the creditor would lose its investment if no insurance is available to insure the property.

Another circumstance that judges lift the automatic stay for “cause” is lack of post-petition payments to the secured creditor. Your pre-petition arrears may be paid through a Chapter 13 bankruptcy plan your bankruptcy attorney drafts and files, but your post-petition payments need to be paid to your creditor once the bankruptcy case is filed. Lack of payment means that your creditor is not adequately protected against a default and they can have the stay lifted so they can continue with foreclosure proceedings to get the property back.

Most of the relief from stay actions are normally filed by secured creditors because they have an interest in the collateral (your car, your house, etc.). You do not have to worry about your unsecured creditors filing motions for relief from stay actions against you for your credit card debts or personal loans as these creditors do not have any cause to lift the automatic stay. One exception is your landlord. If you owe money to your landlord, your landlord may file a motion to lift the automatic stay against you to continue their unlawful detainer action if you are not paying rent to them. Another reason a motion to lift the automatic stay may be filed is to continue a lawsuit in another jurisdiction (for example, a state court) for actions not related to collection of debt. This could be filed by either you or your creditor.

If you have a motion for relief from stay action filed against you, it is highly advisable to seek the advice of an experienced attorney. Since the ability to obtain a relief from stay order from the judge is on a case-by-case basis, you should consult with a lawyer to see if your property may be in jeopardy.