Fifteen Most Frequent Asked Questions & Answers About Debts Problems
1. What if I’m billed for something I didn’t buy?
Try to settle the matter immediately. If you get a bill for something that you did not agree to buy, write to the creditor (the person or company that claims you owe a debt) as soon as possible. Do the same thing if you believe you did not receive everything that you are being billed for. Keep copies of all correspondences.
If you can not work things out on your own, you may find a conswner protection agency. to assist you. The listings of the consumer protection agencies are under “Consumer Complaint and Protection Coordinators” in the white pages of your telephone directory. You may also call the state Department of Consumer Affairs’ toLL-free information line at 1-800-952-5210 for advice, a recorded message may answer some consumer questions for you.
The safest and easiest way is to consult an attorney (see #15), since most debts are based on a contract (a legally binding agreement that can be written or spoken). The most important thing is not to simply ignore the problem, because it could turn out that you do owe a debt, which can deteriorate into a serious money and/or legal problems.
2. Can other people find out about my debts?
Yes. If you do not pay your bills, you will end up with a bad credit rating, which is a report on your financial situation.
Credit ratings are issued by credit-reporting agencies. The three most prominent ones are Equifax, Trans Union, and Experien (FormerTRW). These companies get information about your debts from your creditors, and they make their reports available to other creditors, employers and landlords.
A credit report includes such information as whether you pay your bills on time, have had a foreclosure, owe money as the result of a lawsuit, owe taxes, filing for bankruptcy, or were convicted of a crime. Each piece of information stays in the report for seven years. Information regarding bankruptcy usually will be listed for ten years.
FIFfEEN (15) MOST FREQUENT ASKED QUESTIONS & ANSWERS ABOUT DEBTS PROBLEMS
In the event a store refuses to give you a charge account because you appear to have a bad credit rating, that store must give you the name and address of.the credit-reporting agency which prepared the report, and the agency must let you see the report.
Should you find an incorrect information on your credit report, you must inform the agency of that fact, and the agency is obligated to look into the matter. If the agency claims that its report is correct, you can post a statement of explanation up to 100 words and post it with the report. Therefore, anyone who checks your credit rating will see your explanation. You may also demand the agency to send your explanation to – anyone who received your credit rating for employment purposes in the last two years and to anyone else who received your rating within the last six months.
3. Can I be forced to pay someone else’s debts?
Sometime~ you can. For example, if your spouse obtains a necessity of life – such as food, clothing or medical care – and cannot pay for it, you can be held liable for the debt. This may be true for a former spouse too, providing that you were married and not separated when your spouse incurred the debt.
In most cases, people under the age of 18 can get out of an agreements to buy something. However, if you co-sign a contract or loan agreement for someone under 1 g or for anyone else in that matter, you will be held liable if the person you co-signed for fails to perform. This is because when you co-sign for someone else, you are in fact volunteering yourself to make the payments if and when the other person fails to live up to the agreement, such as
filing a bankruptcy.
You may also have to pay certain debts, such as medical bills for your minor child.
4. Can my creditors pester me?
Creditors or bill collection agencies – companies that try to collect past due bills – cannot legally call you over and over on the telephone, or call you at home earlier than 8:00 a.m. in the morning and later than 9:00 p.m. at night It is also against the law to threaten you with harm or contact you at work after you told them not to. In addition, the law says that if you write and ask them not to contact you at all, they must stop. Then, they can only contact you to let Y°\,l know that they are suing you. Be sure to keep records of all correspondences and
communications. –
Cteditors and collection agencies are not supposed to contact your employer; except to make sure that you are employed or to garnish your wage after they obtain judgments against you.
Creditors are also prohibited from sending you anything that is meant to look like a legal document when it is not. If you are bothered in any of these ways, you should contact a consumer protection or l~w enforcement agency, or seek legal assistance.
FIFTEEN (15) MOST FREQUENT ASKED QUESTIONS & ANSWERS AROT IT n”‘RT~ PRORl PMC;:
5. Can my property be taken to pay a debt?
Usually, a creditor must go to court and win a lawsuit agaipst you before taking your property. However, if you made a written promise to either pay your debt or give the creditor something you own, than the item you promise becomes a “‘security” to the money you owed, a “‘secured debt.” If you fail to pay a secured debt, the creditor may take the security.
For example, you borrowed money to buy a car and the car is the security. If you fall behind on payments, the lender can repossess, or take back,. the car without going to court, as long as the car is on public property when it is repossessed.
Even if the car is repossessed, you still might end up owing the lender money. For example, suppose you owe $8,000 on the car when it is repossessed, and the lender gets only $7,000 by selling the car at an auction. Then, you can be sued for the $1,000 that the lender is out plus any money spent to repossess the car and sell it.
Companies that repair or store items also can take property from you without going to court. For example, if a shop cleans your rug and you do not pick it up nor pay for the cleaning, the shop may keep the rug and sell it after a period oftime.
6. What happens if I am sued?
If you have a secured debt (see #5), the creditor can sue you for either the security or the amount of money it is worth, or both. If you do not have a secured debt, you will be sued for the money you owe.
If you are sued for $5,000 or less, a creditor might decide to take you to small claim court. Neither you nor the creditor can be represented by an attorney in this court, however you may talk to one beforehand.
Lawsuits for larger amounts are filed in Municipal or Superior court, where. it is important to have a lawyer represent you. In any event, do not ignore any court summons that you receive. This is a paper that says you are being sued. If you do not respond to the summons within a certain time (usually 30 days), you automatically lose the case, and a detault judgment will be entered against you. Your property, bank accounts, or wage will be taken.
As soon as you receive a summons, you should:
Consult an attorney (see #15).
Get in touch with the attorney hired by the person suing you and try to negotiate and work out a way to settle the dispute.
You can try to negotiate a settlement even after the suit is filed, but you should do so only if
you have first responded to the summons in writing. .
FIFTEEN (15) MOST FREQUENT ASKED QUESTIONS & ANSWERS ABOUT DEBTS PROBLEMS
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7. What happens if I lose the lawsuit?
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Suppose the lawsuit demanded that you return a secured item. The creditor can get an order
from the judge allowing a sheriff or marshal to take the item from you and return it to the creditor. Once this happens, you debt usually is cancelled.
In California, house foreclosure and car repossession do not need court proceedings as long as they give you sufficient notice. If the amount received by the creditor after foreclosure or auction is less than the loan balance, for instance, after your car is sold in the auction, your creditor only receives $10,000, and the loan balance is $15,000, than you are still obligated for the $5,000 difference. This is called “deficiency”.
Maybe the suit demanded money and you did not pay the amount that the judge ordered you to pay. In this case, something you own can be attached, or taken, such as a car or bank account – that’s about the same value as the amount of your debt. A car, for example, could be sold, and the creditor would get the money it brings in. You may, however, be able to keep certain items (see #8).
A judge also can order your employer to withhold up to 25 percent of your take-home pay to pay a debt. This is called a “garnishment of wages.”
8. Can I protect my property if I am sued?
If you lose a lawsuit, you may lose some of your property. However, the law allows you to claim some property as exempted, which means that it cannot be taken from you. When you receive a notice that your property is being attached, you have 10 days (15 days if you receive the notice by mail) to deliver a “Claim of Exemption” form to the sheriff or marshal. This form describes the property and explains that why legally it may not be attached. Most sheriff, marshal and court clerk offices have these fonus.
The creditor can either accept your claim or challenge it at a court hearing. At the hearing, you must prove why the property is exempted. If you do not go to the hearing, you automatically lose the exemption. You cannot file a Claim of Exemption if your debt is for unpaid federal income taxes or for a necessity of life such as food, shelter or medical
treatment, these debts must be paid. .
Following is a sample list of the things you and your spouse together can claim exemptions for:
Up to $75,000 in equity in your home if you are part of a family unit (up to $50,000 if you are single), and up to $125,000 if you are 65 years old or older, or disabled, or on a low income.
A $1,900 equity in one or more cars.
Up to $5,000 in tools and other items that you need for your work (or up to $10,000 for items used by both spouses who do the same work).
75 percent of your salary for the last 30 days or wages that have not yet been paid.
Up to $5,000 worth of jewelry, heirlooms and works of art.
FIFTEEN (15) MOST FREQUENT ASKED QUESTIONS & ANSWERS ABOUT DEBTS PROBLEMS
Life insurance policies on which you can borrow up to $8,000.
Up to $1,000 in an inmate’s trust account.
Up to $2,000 in a bank account in which you social security payments have been directly deposited ($3,000 if payments are directly deposited for both Ispouses).
In addition, you and your spouse each can claim exemptions for:
Household furnishings and clothing that your family needs.
A cemetery plot.
All or part of retirement, disability and health insurance, workers’ compensation, welfare, unemployment, union and other benefits that are needed to support your family.
9. What if I just need more time to pay my debts?
First, ask your creditors for the time you need, or ask if you can make a series of small payments over a period of time. If any creditor agrees to one of these arrangements, write a letter to confirm the agreement. Keep a copy of the letter.
You might try using the services of a credit and debt counseling agency, but be. sure to shop carefully until you find one that you feel confident in. Consumer Credit Counseling Service/Credit Counselors of California is a network of non-profit agencies partially funded by creditors and the U.S. Department of Housing and Urban Development (HOD), which often helps people work out plans with their creditors.
Be careful about getting a debt consolidation loan that is used to payoff debts. If the interest (the money that lenders charge for loans) is too high, you may end up with a bigger problem. If you do get a loan, please niake sure all the financial statements that you give the lender are true and complete.
With the above options in mind, the safest and easiest way is to find an experienced lawyer to work out deals with your creditors.
10. What if my creditors won’t give me more time?
You can file a “Chapter 13 bankruptcy” in the nearest United States Bankruptcy Court. Chapter 13 allows you to stop all collection in exchange for your promise to pay your available funds to creditors under a Chapter 13 plan. The repayment plan allows you to pay your debts over a period of time – between three and five years. At the end of this time, all your debts are cancelled – even if you have not paid them in full – as long as you fully performed your plan. Another option is to file a Chapter 7 bankruptcy. This means you ask the bankruptcy court to cancel most or all of your debts because you don’t have enough money or property to pay them off.
You must pay a filing fee in bankruptcy court ($ 1 94for Chapter 13, $ 20 9for Chapter 7), either alone or with your spouse. A trustee will than be appointed. If you have a Chapter 13 plan, this person will collect your payments and pay your creditors. If you file for Chapter 7,
FIFTEEN (15) MOST FREQUENT ASKED QUESTIONS & ANSWERS ABOUT DEBTS PROBLEMS
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the trustee will sell any of your properties that are not exempt (see #14), deduct hislher administration fees and costs, than distribute the money it brough~in among your creditors.
Most of the Chapter 7 cases are non-asset cases, which means no properties is available for trustee to sell.
Once you have filed for Chapter 13 or Chapter 7, the creditors you had before you filed cannot attach you salary or other possessions without bankruptcy court permission. If you lose your job or have a long illness while you are paying off your debts through a Chapter 13 plan, you can switch from Chapter 13 to Chapter 7 at any time. You can also switch from Chapter 7 to Chapter 13 at any time. You can file for Chapter 7 only once in a six-year period. But you can file for Chapter 13 as often as you need to. However, you must have a good excuse if you fail to complete the plan and want to file a second time. You can file for Chapter 13 right after Chapter 7 completed or file for Chapter 7 right after Chapter 13 completed with no time limited.
11. When should I use a Chapter 13 plan?
You may consider a Chapter 13 plan if you can work out a way to payoff part of your debts over a period of time and still afford the reasonable costs of living.
The law says you can use a Chapter 13 plan if you have a steady income. This means you work for wages, own a small business or receive pension, social security or other benefi~. You also must owe less than $ 9 2 2~ 7 9n secured debts, such as a mortgage, and less than $ 307,67 Sin other debts such as credit card debts, medical expenses, and gambling debts.
If you qualify for Chapter 13, you and your lawyer must work out a plan for the court to approve. The plan must show how you intend to pay all or part of your debts. Certain debts must be paid in fulL These include secured debts, federal or state income taxes that you have incurred in the past three years, and the court, trustee and attorney fees involved in setting up and carrying out the plan.
12. Should I file for Chapter 7 instead?
If you can’t work out any other reasonable way to pay your debts, you might consider Chapter 7. It allows an honest debtor to make a fresh start by having a court discharge, or cancel most debts. Chapter 7 is a way to get out of debt when you owe more money than you can be expected to pay in a reasonable amount of time.
The law says that an employer can not fire you or refuse to hire or promote you because you filed Chapter 7. However, Chapter 7 can have a bad effect on your credit rating (see #2) for a long time (it stays in your credit record for 1 0 years), but you can try to rebuild your credit after you filed a bankruptcy. If you do it right, you can get your credit back in two or three years. However, keep in mind that Chapter 7 can only solve the problems you have now, it win not protect you if you can not pay your new bills.
FIFfEEN (15) MOST FREQUENT ASKED QUESTIONS
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If you choose Chapter 7, you or your attorney must file a number of forms and papers with the bankruptcy court These include a list of your debts and property, plus information on your income and how you spend it The court decides if you are better suited for Chapter 13 than Chapter 7 if requested to do so. In rare situations, the court may decide to dismiss your case.
Also, a judge can refuse to discharge all or some of your debts through Chapter 7. For example, you may not be allowed to have your debts cancelled if you run up a lot of bills on purpose or if you borrow money just before filing with a dishonest motive. There are a lot more Chapter 7 filings than Chapter 13.
13. Will Chapter 7 wipe out an my debts?
No. Chapter 7 does not cancel:
Secured debts.
Most income taxes incurred in the last three years.
All student loans, unless you qualify for a hardship discharge.
Child and spousal support.
Any money that you owe as a result of being sued for drunken driving.
Your debts also will not be cancelled if a creditor proves that you lied about how. much money you have, tried to hide some of your property or committed fraud. You may choose to reaffirm a secured debt. This means that you decide to pay the debt and keep the security, even though Chapter 7 would otherwise cancel the debt. If you decide not to reaffirm the debt, you need to return the security and your debt will be cancelled.
14. If I file for Chapter 7, can I keep any property?
If your property is exempt, it cannot be used to payoff debts in California. When you file for Chapter 7, you can choose between two sets of exemptions. One set is the same as the one you can use to protect your property from creditors in a lawsuit (see #8). Homeowners generally prefer this set, since it allows a much larger home equity exemption than the other set.
The following is a sample list of things that you and your spouse together can keep if you Use the second set of exemptions:
A $lg ,45{) interest in a home and/or burial plot. If you do not own either one, you can apply the $18,1:50 elsewhere to keep such non-exempt property as an income tax refund, cash, or stocks. You also have an $800 floating exemption, which means you can apply it to any non-exempt property.
A $2,950 interest in one car or other motor vehicle.
All items worth up to $415 in each of these categories: household furnishings and goods, clothing, appliances, books, animals, crops and musical instruments.
$1,.225injewelry.
$1,gs0 worth of books or tools that you need to earn a living.
FIFTEEN (IS) MOST FREQUENT ASKED QUESTIONS & ANSWERS ABOUT DEBTS PROBLEMS
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An unmatured life insurance policy and cash value in a life insurance policy up to $8,000. Social security and veterans’ benefits, unemployment insurance money and pension and
profit-sharing plans. i
15. How can I find a lawyer to represent me?
You may seek recommendations from your friends or family or simply look in the yellow page of your telephone directory, local newspaper, radio or TV advertisement or commercials.
You may call and make an appointment to see an attorney. A lot of law firms offer first time free consultations. If you decide to hire the firm, make sure you are cleared as to what you will be paying for, how much will the service cost, are there any hidden fees, and when will you- be expected to pay your bilL An attorney experienced and specialized in debt counseling
and bankruptcy laws is obviously a more preferable choice than one that does other kinds of cases, such as immigration, divorces, personal injuries, criminal defense, etc.
In the event that you can not afford legal services or if your income is very low, you may qualify for free or low-cost legal help. Check the white pages of your telephone directory for a legal services program such as a legal aid society in your county. You may belong to a “legal insurance” plan that covers the kind of services you need.
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