Debt tsunami! Do you feel like you have too much debt? Get to the high ground!

Are you drowning in debt?  Do you feel like a tsunami has hit your family, your household.  You are not alone.  In the reporting on the tsunami I noticed something.  They showed a bunch of people practicing running up the hill in their small town when the tsunami warnings sounded.  They already had walkways with steps that led up.  These were well-worn and looked like they had been there a while possibly for hundreds of years.  It makes sense because tsunamis have been around for hundreds of years also.

Bankruptcy has also been around for some time.  Well worn paths lead up the hills to the safe bankruptcy ground just like in Japan.  We can go there when the debt tsunami hits.  Its safe, secure, and has been well used for hundreds of years because debt has been around for that long too.

But people don’t go up the hill when debt hits like they do when a tsunami hits Japan.  They wander around the low ground and guess what happens.  They drown in the debt eventually.  The hill is there.  Safety is on top.  The path is well-worn and paved and is even complete with rest areas.  There is even a guide for you on your journey up the hill so you don’t have to go alone.

So don’t stay in the valley and get swept away by the debt tsunami.  Climb the path when debt hits.  Stay safely away from the damaging debt.  Come back down the hill to no debt.  That is the beauty of bankruptcy.

I am a bankruptcy attorney practicing bankruptcy law in San Diego California.  Please visit my website at www.farquharlaw.com.

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Update on debtor’s prisons: Wall Street Journal confirms they are returning. I say let my people go!

(See my most recent debtors prison blog here: http://bit.ly/I2qMO2 .

I wrote about this in a previous blog but now the Wall Street Journal has confirmed that there is indeed a widespread use of what appear to be debtor’s prisons in many states in America even though such practices were outlawed federally and in most states  in 1833.  This practice is increasing with the deepening and lengthening of this recession.  So just when people are hardest hit by job loss, high unemployment, higher commodity prices, and housing price collapse, they are also getting hit with being put in jail for owing purely private debts.

Some judges appear to be on board with this.  One is quoted in the article saying “wish I could do it more” and “It’s often the only remedy to get people into court and paying their debts”.  No matter to the judges if the debtors can’t pay because they have no money and no job.

These debtor’s prisons were outlawed almost 200 years ago for a reason.  It makes no sense to jail a person who owes money.  It costs more to jail them than could ever be collected from them.  It breaks up whole families, subjects people to the humiliation and danger of jail, and can leave them emotionally scarred for life.  If you don’t believe that this is happening now then check out the stories below.

Also a debtor’s prison can subvert the legal system.  Hundreds of years ago they were used by people to get their enemies out of the way.  The creditors knew that the people they had jailed were not going to pay but they wanted them in jail for revenge often times.  There are other motives for jailing people for debts like putting the fear of jail into everyone so they never dare to not pay any debt.

I believe that our ancestors actually knew better than we did which is why we should give them more respect.  They gave us the Constitution and they outlawed debtors prisons in 1833 for a reason.  They realized then what we have forgotten now.  In a free country debtor’s prisons are extremely harmful to the populace and they should be banned altogether and they should not be allowed to creep back into operation.  No one should ever be jailed or fear jail for owing a purely private debt.

Debt collection companies use our taxpayer-funded court and prison systems to collect their private debts.  It doesn’t matter to them how much it costs because they are not paying for it and they are just eventually getting paid from it.  If they find a friendly judge like the one above then so much the better.

And now for the horror stories.  One man in Indiana, pictured with his kids, spent two nights in jail for a $4,000 debt.  What did they tell the kids when they asked where’s daddy?  What if he is a single dad?  Another from Carbondale Illinois spent five days in jail for failing to pay a $275 debt.  In a previous blog about debtor’s prisons I talked about a woman handcuffed and carted off to jail who kept there all night while she stayed awake and shivered from the cold.  She wasn’t told until the next morning even what the charge was.  It was of course non-payment of some private debt.  Another was threatened with jail by the judge in the case “indefinitely” until he began making payments to some lumber company.

Another man in Indiana in 2009 answered a knock on his door to find the deputy sheriff there with a warrant for his arrest.  He was arrested in front of his two kids and taken to jail.  There he spent two nights and he was stripped searched and sprayed for lice.  He described it as “the scariest thing that ever happened to him”.  It turned out that he owed around $4,000 to the loan company for his truck which was probably a deficiency balance.

The most troubling thing is that he stated in the article that he did not even know he was being sued.  He was finally let out of jail after two days after he agreed to pay $1,500 to this company for the truck.  But this person it seems was not properly served and had no idea he was being sued until he was summarily thrown in jail for merely owing money to a private party.

Often the people who are thrown in jail are destitute and can’t afford rent and food let alone these debts.  Are we to let them languish in jail “indefinitely” or forever because they cannot pay?  Are we then not returning to some dark ages?

It’s far worse too if there has been some mistake.  The debt collectors say they rarely make mistakes but that is not my experience.  They easily could have the wrong person or the wrong amount as they tack on all sorts of fees.  They can also easily fail to serve a person the lawsuit so the jailed person may have no warning of what is coming.

My clients often have their debts double or triple over the years before they discharge them in bankruptcy.  You have a right to demand debt validation according to the Fair Debt Collection Practices Act but many debtors don’t demand validation and others are arrested and jailed without warning before they know what is even happening.

Some states’ regulators are fighting back.  Illinois is seeking to revoke the license of at least one debt collector and Kentucky is seeking to do the same.  Sometimes these companies have been granted a vast number of arrest warrants against individuals for non-payment of a private debt.  The Federal Trade Commission is also investigating but in the meantime debtors are still going to debtor’s prison with the full blessing of many judges.

In fact 5000 such arrest warrants for debts have been issued since 2010 in just nine counties that reported in the one-third of states that allow this.  But what about the nonreporting counties?  Many counties don’t report so we don’t even know how many people are languishing in illegal debtor’s prisons across the country.  It seems that the illegal arrest warrant issuing has increased substantially along with the economic crisis.

Washington state has passed a bill requiring collectors that they prove (or validate) debts before an arrest warrant can issue for that debt.  Florida is issuing special training sessions to judges so they know about the abuse that can result from this.  In McIntosh County in Oklahoma 1500 arrest warrants were issued which is up from 800 the year before.  950 received arrest warrants from Salt Lake City courts and Maricopa County Arizona issued 260 in 2010.  This problem is not going away but continues to increase.

I know from my clients that people have no more money this year than last year but the arrest rate is increasing.  And these arrests are illegal according to federal laws and according to all states.  Debtor’s prisons were outlawed so how is this happening?  These arrests need to be challenged by lawyers whenever and wherever they occur in my opinion until some precedence can be established that future debtors can rely on protect them from jail.

In California I am not currently aware of people being issued arrest warrants for owing purely personal debt but be aware of situations that could amount to debtor’s prison.  Courts always maintain that they put people in jail for violating a court order and not for owing debts and thus they get around the constitutional prohibitions.  Some creditors in some states have used this loophole to just get a judge to order payment of the debt and when payment is not made then the judge issues an arrest warrant for failing to follow a judicial order.  This amounts to the exact same thing as a debtor’s prison.

In California they have not gone there yet as far as I have seen.  Collections are still a responsibility of the creditor once a judgment for the debt has been issued by the court.  We in California are thus luckier than many other states.  But creditors can demand that debtors attend a “debtor’s exam” and the creditors can have a court issue the order.  Failure to attend one of these can result in an arrest warrant being issued and can result in a debtor being put in jail.  So be careful if a debtor’s exam is ordered if you have unpaid debts in California.  It can possibly be used by creditors as a back door way of getting you in jail for purely private debts.

Remember that filing bankruptcy results in an immediate stay being created which blocks any further collection efforts being used against you.  This would include any use of debtor’s exams and presumably it would require your release from jail for any failure to pay any debt.  It would be hard to file for bankruptcy if you are in jail so it’s better if you beat them to the punch and file before things get this bad.

I am a bankruptcy lawyer practicing bankruptcy law in San Diego California.  For more bankruptcy or debt related info. (including debtors prison) please visit my website at www.farquharlaw.com and www.freshstartsandiego.com.  Or call me directly for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Are credit card companies unleashing the dogs of war? Their calls appear to be increasing in frequency.

You may have experienced that it doesn’t take long for the credit card company vultures to call you if you are late.  One blog I found called them the “collection police”.  The blogger was shocked that he got a call after being 1 day late.  Someone from the collection police called him one day after his payment due date and asked for a payment right away.  He was floored as he had never been late on a payment in his life and the last thing he expected was a call from his creditors.

I certainly have been late on my payments to these credit card companies and I have talked to India many times.  I often ask about the weather in Mumbai when I get on the phone with one of these people who speaks english with a funny british accent.  But it does seem like there has been a lessening lately in the time that credit card companies give you to pay your bill.

It used to be that these companies (in the good old days) allowed you to be 30 days late before you heard from them.  Then it seemed to advance to 2 weeks and then one week and now my clients report getting calls from credit card companies when they are one day late.  The collectors call and ask for an immediate payment and they don’t seem to care if you have been on time for 6 months or 60 years.  They couldn’t care less and they just ask for the money.  They are starting to act like loan sharks from mob movies when they say “just pay me”!  They truly seem to be unleashing the dogs of war after only one day.

The blogger who got the call was shocked by this but I would advise him to get used to it.  I noticed that these guys from these credit card companies are calling me quickly if I’m late on a payment and they don’t wait long.  I theorize that they have stepped up their enforcement of their debt collections.  Someone has reasoned that if they could just get the calls out quicker and the money in faster than they could collect more.

It is the time value of money.  If the money is in their bank earning interest then they get the interest and not you.  Now remember that they have millions of accounts and even one day quicker on payment could net them millions more dollars so they get the calls out to demand you pay them more and more quickly.  In the future I expect that they will come up with some hour in the day when your payment is due and then they will call you at one minute after that hour has elapsed.

So get used to it as this is the way it will undoubtably be for some time.  For now expect calls to come even if you are one day late and even if you have been on time with your payments for your whole life.  The company and the guy in India don’t care about your payment history or how good of a person you are.  They just want your money now.

One sure-fire way to rid yourself of this headache is to file bankruptcy.  That will stop the calls and end your liability for the debt.

I am a bankruptcy attorney practicing bankruptcy law in San Diego California.  Please visit my website at www.farquharlaw.com.

What’s in your wallet? These huge credit card companies are plenty rich- it’s okay to file for bankruptcy!

Bank of America, Chase, Wells Fargo, Capital One, Citibank, Discover, American Express.  Recognize these guys?  You probably owe them money right now and I’m not talking about for your mortgage, car, or for some other secured asset.  I’m talking about credit cards.  What’s in your wallet?  Probably there is some credit card in there right now with one of these names on it and you are in debt.

If you check you will see that these are very large companies.  They have billions of dollars in assets and if you think about it is a very easy business to run.  Think of them like Joe Pesci in the movie “Casino”.  They get a little money and they “put it on the street”.  But you are the street.  They borrow money at a low-interest rate and lend it to you at a higher rate.  If you default or are just late on the payments then they will jack your interest rates and charge you all sorts of penalties.  They make a tremendous profit on you when you cannot pay them.

Remember they don’t have a plant with machinery where they make things or even an office where they give advice.  They just need a little small space where there is a phone with which they can call you twenty times a day when you don’t pay them.  Are you getting those calls now?  Most of us do and they call now not just when you are a month late or even a few weeks late but if you are a day late.  They seemed to have recently decreased the time they allow you to not pay them.

According to Wikipedia Bank of America is the largest financial services company in America and also the largest bank holding company.  It is the second largest bank in the country by market capitalization.  As of 2010 B of A is the fifth largest company in the U.S. by total revenue and the second largest non-oil company in the U.S. after Wal-Mart!

Wells Fargo is the fourth largest bank in the U.S. by assets but the second largest by market capitalization.  JP Morgan Chase has assets of $2 trillion.  Citigroup has the largest financial services network in the country and it has over 200 million customers.  Get the picture?  They are huge and they won’t miss your debts if you get them discharged in bankruptcy.  Most of the big banks received federal bailouts financed by your tax dollars when they ran into financial difficulty.

Where is your bailout?  Do you get a break when you get into financial difficulty?  These companies are the largest and richest companies in the world and they are deemed “too big to fail” and when they get into trouble they run to the federal government (that’s you) and they ask for and get a bailout so they can make more money.  Did you get a break?  A bailout?  Where can you go when you run into financial trouble?  How about they only call you ten times a day when you owe them money?

Forget about it.  It’s not going to happen.  You will get no breaks from these companies.  They only move one way and that is forward in collecting money from you.  They will call you, hound you, and harass you into paying them.  Your only way out is to file bankruptcy.

Bankruptcy stops the calls, the harassment, and relieves you of the liabilities for those debts.  It makes sense and is the only break you are going to get.

So don’t feel bad for these banks who are too big to fail.  They are the largest and richest entities in the world and they won’t miss your little debts when you file bankruptcy.  They will write it off as a loss on their corporate taxes.  Remember that most people have paid back all of the money they borrowed on their credit cards with interest before they file bankruptcy.  It’s just that the interest rates are so large that they have to keep paying indefinitely.

How long does it take to pay off a card if you make the minimum payment?  I don’t even know anymore but it used to be 30 or 40 years.  That is debt slavery.  Don’t let yourself be a slave!  File for bankruptcy if you have debts you cannot pay!

I am a San Diego bankruptcy attorney.  Please visit my website at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation on any bankruptcy or debt related issue at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Failure becomes success! Bankruptcy can turn what you think is failure into success.

We live in a country that worships success.  We are trained to seek success and successful people and we hold those who are successful in high esteem and we wish success desperately for ourselves.  Being called a “loser” is for some the worst kind of insult in our success driven culture.

We also have an aversion to failure.  Failure is something to be avoided at all costs.  It means in America that you must hang your head, get depressed, and it can mean worse.  After a failure you feel alone, isolated, and unworthy.  You may even feel that something is wrong with you as you look around you and it seems that everyone else has no problems.

Over the last few years a different paradigm has become more popular.  The idea that we learn more from our failures than from our successes has rung true for many.  People have come to realize that though a success may give you a false sense of superiority or invincibility and cover up other weaknesses, a failure may reveal to you areas in your life that need improvement or areas where you need to do more work.

You truly can learn from failures or experiences of failure more than you can from a success.  After a failure most people inevitably examine everything they did to get to that point with an eye to the future so they don’t repeat the failure.  In that critical examination a whole lot is learned about oneself and one’s actions and beliefs and goals. With a failure you are forced to ask what is truly important or what does success really mean.  Rarely does such a critical reexamination take place when one is successful in anything and if success comes too easy to people then they are robbed of a very great opportunity.

Think of the child stars for instance.  How many of them are functioning, well-adjusted, and happy adults?  And how many would you consider to be a success?  Very few.  Many child stars have extreme success at a very early age.  They get money, fame and fortune enough at an early age to set them up for life.  But we all know that these children usually grow up to be very disturbed adults.  Why is that?  Because fame and fortune came too early and too easily.  They were truly robbed in life of the opportunity to struggle and fail.  The struggles and the failures are a necessary and essential element of life.

According to a Harvard grad success is not all it’s cracked up to be anyway.  It can often feel like failure.  A Harvard student wrote an article on how he didn’t feel successful even after graduating from Harvard.  This should have been a time for him to celebrate success but his graduation left him feeling empty.

He began to describe in the article how students are taught at Harvard to be risk averse.  They are protected from failure and never allowed to fail.  These Harvard kids have known nothing but success as they graduated with honors from high school and now they have a Harvard degree.  But the author concludes that Harvard students have been robbed of their chance to fail.  He makes my point that failure is a tremendous learning opportunity and people need to risk failure instead of avoid it.  When it happens embrace it and learn from it.

The old adage that we learn more from our failures than our successes is true.  I have learned more from my failures than my successes in life and if you think about it the same will be true for you if you have been lucky enough to have failed at something.

I had a failed in a business venture that I desperately did not want to let go because I did not want to appear to be a failure.  It was very difficult for me to close the business and admit failure even though the business was losing money and obviously needed to be closed.  But after I did close the business I engaged in the mandatory self reflection that was a great benefit.  I learned to never make some of the mistakes I made again.  I readjusted my life and went out and retried everything.

The same can be done with your financial failure.  You at first will resist and try to make your situation work.  All of my clients do.  You will try to work harder and smarter and pay off your credit cards and other bills.  When this doesn’t work you will resist failure strongly.  When you finally break through and admit that a fresh start will help you then you will be ready.

Your debts can be wiped away while you move on debt free.  A financial meltdown can be a tremendous learning experience just like any failure can be.  You will learn more from this experience than the person who has no such problems will.  You can and will learn to live with in your means and manage your credit wisely as we all must.  Very few people are “serial filers” who continue to file bankruptcies.  Most learn their lesson and move on debt free and change their lives.

Donald Trump and many others who are considered very successful have used bankruptcy to get a fresh start, learn from their mistakes, and move on with new knowledge and a new life.

So embrace failure and welcome it as an opportunity to reflect, learn, grow and adjust.  Think of failure as a blessing and as a pathway to success and you truly will get success through failure.  (See my article on why you should file for bankruptcy).

I am a San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Please call for a free consultation on any bankruptcy or debt related issue at (619) 702-5015.   Call now for free credit report and analysis! 

If you or someone you know may need to file a bankruptcy then please get my FREE E-BOOK “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by e-mailing me at farquharesq@yahoo.com.

Can I still go to debtor’s prison if I owe money? Look out Charles Dickens, in some states unfortunately it appears that it is happening now!

(My most recent debtors prison blog is found here: http://bit.ly/I2qMO2 .

There are numerous articles posted online that describe cases where people appear to have been put in jail in some states for merely owing  monetary debts.  This can happen to debtors who either owe money to the court or to private parties.  And this has happened in spite of the fact that debtor’s prisons were outlawed federally in 1833.  Most of the states followed suit after 1833 and included clauses in their constitutions prohibiting imprisonment for owing money to someone.

In spite of these prohibitions debtor’s prisons seem to be making a comeback.  There are states where it’s possible to put someone in jail for failure to pay a debt.  I am surprised that lawyers in these states have not put together constitutional challenges to someone who was thrown in jail for such a monetary debt.

According to blog I found online people are languishing in Illinois jails, in Champagne and other counties, for owing unpaid traffic tickets.  A law professor from Notre Dame Law School quoted in the article says that we do have “de-facto” debtor’s prisons because of this practice of jailing debtor’s for merely owing money in spite of constitutional prohibitions even if the money is owed to the state.   According to this law professor this creates a situation where debtors are scrambling to come up with money by any means just to stay out of jail.

An article in the Saint Petersburg Times points out that it costs the jails $53 per day (in Florida) to incarcerate these people who often don’t owe much money.  So the taxpayers pay for the jailing, the judge, and the whole judicial system that wastes time and money trying to collect from these destitute people.  In Florida they have an ominous sounding “Collections Court” that handles these cases and about a third of Florida counties have these courts.  Even in the counties without these courts people are still being jailed for owing money.

According to the Times article it costs the system $62,085 to bring in $80,450 in debt.  Those languishing in jail for these unpaid tickets are certainly poor and often minority but anyone without means can get caught up in this travesty of justice.  How is it still a possibility that you could go to jail for owing money?  Were debtors prisons not outlawed in the 1800s?  Didn’t Charles Dickens inform us 200 years ago about the foolishness of this practice?

The Times article points out that you can be jailed for violating a court order or for failing to make court ordered payments.  So technically they are not being jailed for owing money but it amounts to the same thing.  Jail time is usually given to people who owe spousal and child support but legal experts argue that it is all illegal.

Now there is more and more disturbing chatter on the internet about debtors being jailed for owing a purely private company money.  There are horror stories emerging about arrests made and persons jailed for owing money to private parties.  On such woman was arrested one day, handcuffed, put in a very cold police car, brought to jail and no one told her why for some time while the contents of her purse were unceremoniously dumped in a plastic bag.  She spent a cold night in jail keeping her hands under her armpits for warmth until 16 hours later when she was informed that she missed a court hearing concerning some private debt.

In that case she had missed a court hearing but in Indiana a man faced jail for just failing to pay a purely private debt.  His incarceration had nothing to do with violating a court order.   According to an online article in the Minnesota StarTibune a lawyer challenged the constitutionality of a debtor being threatened with jail for owing a debt.  The appellate judges agreed with the lawyer and he won the case because debtor’s prisons were made illegal in Indiana in the 1850s.

The article in the Star Tribune points out that there is an inconsistency with who is locked up when, and for how much debt, and that all of these things vary from state to state and county to county.  It also makes mention that no one knows how often this happens as no statistics are kept of these incidents.  One man in Illinois was locked up by a judge “indefinitely” for owing $300 to a lumber yard.

Now it seems that the collection agents are influencing the legal system more and more to be more creditor friendly.   Some would say that the collectors are subverting the legal system and using the threat of jail and jail time extract money from people who cannot afford to pay anything towards these privately held debts.

The good news is though that bankruptcy can remove most debts from your balance sheet.  After a bankruptcy discharge you legally no longer owe the debts anymore so no creditor can try to collect on them or try to get you put in jail if you don’t.  Your legal obligation to pay these debts is eliminated.  With debt collectors gaining in power and money and influence this is a very good thing.

In California I know that the courts can threaten jail if you do not attend the court ordered “debtor’s exam”.  This is where a creditor can ask you all sorts of personal questions about your assets and your financial situation.  The courts cannot jail you if you do not pay the creditor in California but they threaten to jail you if you don’t show up for the court ordered exam.

I filed a case for a client the day before his debtor’s exam and he brought his bankruptcy case number to the debtor’s exam.  The other attorney did not know what to do but the judge threw the whole case out right there and told her to go to bankruptcy court for any money.  My client had nothing and the creditor had no reason to declare his debts non-dischargeable so that is the last we ever saw of the creditor.  My client got his discharge without a problem.  Bankruptcy is indeed a powerful mechanism to defeat over-zealous creditors.

You almost always don’t have to argue whether you owe a debt after bankruptcy and you don’t have to argue whether any punishment is constitutional.  I wrote another blog about debtor’s prisons here: http://bit.ly/JmsMFt .

I am a bankruptcy lawyer practicing bankruptcy law in San Diego California.   For more information related to debt, bankruptcy, or debtor’s prison please visit my websites at www.farquharlaw.com and www.freshstartsandiego.com.  Or call me directly for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.