USAToday just published an article about the increasing use of Facebook and other social networking sites in divorce cases. That really doesn’t take a genius to figure out. Guy denies affair. Girlfriend posts pictures. From an evidentiary perspective, that’s sweet.
So, are there any Bankruptcy Trustees routinely searching for Debtors online? I doubt it — at least in most cases. However, that doesn’t mean that a Bankruptcy Trustee won’t just happen to search for something else — maybe, a lake house for himself; and run across a familiar name. More significantly, I would expect Trustees to start searching Social networking sites in cases where they suspect something is amiss. Cases where maybe the income history and the asset/spending pattern from the schedules don’t seem to jive.
Debtors get caught trying to conceal assets in the darnedest ways. I haven’t heard of a Facebook exposure yet, but I’m sure it is coming.
I get frequent calls from people who are way over their heads with student loan debt. It used to be that anything over $50,000 got my attention. Boy was that the good, old days. Now, it is going to have to be six figures before I blink.
Anyway, a blog I read pointed me to a nice discussion of the student loan collection manual published by the U.S. Department of Education. If you are dealing with a private collector for a student loan, you will want to read this post.
Credit Slips has posted a blog entry that brings together both a Business Week article and related source material discussing a possible insolvency filing by BP. I don’t actually think this is likely in the short run, but it makes for fascinating reading. I mean, if you’re a serious Bankruptcy law geek. . . .
There is a movement afoot to increase the regulations governing debt settlement companies. These are the companies who advertise that they can negotiate substantially reduced deals with your credit card companies. If you have seen a banner ad that says something like, “Reduce your credit card debt by 40-50%”, odds are you have encountered a debt settlement company.
USAToday.com ran an article today on this very topic. They interviewed a couple of people who had used debt settlement companies, one got bad results, one got good results. Over the years I have seen a lot of clients who have used one of these companies before coming to see me. I have them bring me there contracts. Some of them are downright appalling.
There are two problems with the debt settlement business model. In order to do it well you have to really work your files and you have to be very, very good. There may be a way to do it well representing people in other States, but I don’t see how. To do it well, in my opinion, you need to be prepared to aggressively defend collection litigation as it gets filed. (If you are considering a debt settlement company, read the contract completely but pay particular attention to what they do with the money you send them and what they will, or more likely won’t, do if you get sued during the process.)
I have heard of a good debt settlement company in Texas. They only take clients in their area, and I heard a presentation about them some years ago; but I no longer remember their name. Even a good debt settlement company can’t get you out of the second problem.
If you “settle” debt by convincing a creditor to accept less than it is owed, the amount that you don’t pay will get reported to the IRS as forgiveness of debt income. I have written about that before. This means that unless you meet certain tests and deal effectively with the IRS, you could wind up having to pay taxes on the amount of debt that was forgiven. Oops.
Debt settlement companies know how to say what desperate people want to hear. Just remember the old rules. Read everything. Don’t sign anything you haven’t read or that you don’t understand. When in doubt call the Better Business Bureau, and always know where the money goes and who gets it.
USA Today is reporting that Bank of America, as the purchaser of Countrywide, is paying $108 Million in penalty to the Federal Trade Commission (to be distributed amongst the effected parties). The FTC discovered that Countrywide was charging excessive fees to home owners who were facing foreclosure. These fees were for things like property inspections and landscaping (I assume that means mowing). What Countrywide was doing was creating wholly owned subsidiaries to arrange for the services and then bill the accounts at an inflated price.
At the very bottom the article also mentions that Countrywide has been known to misrepresent the nature, and amounts due on loans, it looks like they may have discovered some false Bankruptcy claims and concealed fees. This should be shocking. It isn’t. I sued Countrywide for its bankruptcy related accounting practices a few years ago. What is more disturbing is that these practices, or variants on them, are widespread throughout the industry.
We don’t let debtors lie, cheat or steal in Bankruptcy. It is high time we stopped letting creditors do it.