DTE Energy and Bankruptcy

DTE_Energy_logoClients come in to our office due to a variety of financial issues, it could be credit cards, medical bills, collection accounts, mortgage issues or lawsuits.  The majority of our clients would be more than happy to pay their bills, but their current financial position prohibits them from doing so.  In fact, sometimes their financial position even prevents them from paying for necessary everyday living expenses such as rent, gas, electricity and water.

DTE Energy, a major provider of electric and natural gas for metro-Detroit residents, offers a variety of payment programs for those struggling to make their monthly payments.    One of the payment options, BudgetWise Billing, offers clients the ability to make the same payment each month.  The intent is to help people deal with the seasonal ups and downs of your bill.  This means, on any given month, you may have a credit or a balance with DTE even if you are current on your payment plan.

Most of our clients fit into one of the following three categories.

  1. First is the person who is current on their payment plan, but has a balance with DTE.
  2. Second is the person who is months behind on their DTE bills and facing shutoff.
  3. Third is the person who has an old DTE bill that has a balance.

Regardless of your specific situation, this blog is intended to examine how DTE Energy operates if you file for bankruptcy and have a balance on your DTE account.

How is a DTE Bill Handled in Bankruptcy?

Once a bankruptcy is filed, the automatic stay goes into place.  The automatic stay prevents DTE from collecting on any balance owed to them.  More importantly, especially in the winter months, it prevents DTE from shutting off your service.

In order to prevent violations of the automatic stay, which can have serious consequences, DTE uses a database to see if any of their clients who have an outstanding balance have filed for bankruptcy.  If they find a person who has a balance, their current account will be closed and DTE will open a new account.  Next, DTE will then send a notice requesting a client put down a deposit on the new account.  This may seem like a violation of the automatic stay.  However the bankruptcy code, specifically 11. U.S.C. §366, permits DTE to request adequate assurance payments in exchange for continued service.  DTE claims the deposit amount is based on the last 2 months average usage.  However, in our experience we have found that is not always the case and DTE may ask for more.

Receiving a bill for a security deposit payment frequently comes as a shock to clients who are current on their BudgetWise plan.  The client typically does not list DTE because they do not believe a debt is owed, but due to the month their account is currently carrying a balance.

Understandably, this can be frustrating for our bankruptcy clients, but there are options.  First, you can pay the deposit amount and the utility service will be kept on.  Second, you can file a motion with the court to determine what the security deposit for DTE should be.  If DTE responds to the motion, the judge will make a determination of what the security deposit is.

Thankfully, it is not all bad news.  The deposit will be returned if you make all of your payments on time for 12 consecutive months.

 

Michigan Suspended License Due To Judgment

DLClients call our office for a variety of debt related issues.  Most of the time the client is aware of the debt and the standard ramifications of a judgment.  A judgment in Michigan can result in creditors garnishing your wages, bank account, or Michigan state tax refund.  It may also result in a seizure of property or a lien being placed on property.  Very few clients realize that under Michigan law their license may be suspended due to an unsatisfied judgment that arose out of the ownership, maintenance, or use of a motor vehicle.  Therefore, it comes as a shock when they get pulled over and the police officer explains to them that they are driving on a suspended license.

Suspended License Due to Debt

Under MCL 257.511, if a person fails, within 30 days, to satisfy a judgment, the plaintiff can request the court to forward an abstract of the court record of the judgment to the Michigan Secretary of State.  The Secretary of State may then suspend your license.  Your license will remain suspended and will not be reinstate or renewed until (1) notification that an installment payment agreement is received, and (2) you file proof of financial responsibility or the judgment has been satisfied.  Once the Michigan Secretary of State receives the judgment from the court they will send you a letter.  You will have 30 days from the date of the letter before your license is suspended.

Penalties for Suspended License

There are severe penalties for driving with a suspended license.  MCL 257.904(1), (2), and (3) and 904b provides that a person convicted of Driving While License Suspended, Revoked or Denied or any unlawful operation of a motor vehicle while the person’s license is suspended, revoked, or denied may be sentenced to imprisonment for up to 90 days, or fined up to $500, or both, and for a second or subsequent conviction may be imprisoned for up to 1 year and fined up to $1,000 or both.  Such conviction or convictions will result in the confiscation of the person’s license plates and the impoundment of the person’s vehicle for at least 30 days.

As you can see, there are some serious ramifications for failing to pay a judgment which was the result of a vehicle accident.  If you are in a lawsuit which arose out of the ownership, maintenance or use of a motor vehicle, then it’s important to know your options.  Give our office a call so we can review your case and help determine the best way to prevent your license from being suspended.  Or, if it has already been suspended, figure out the best way for it to be reinstated.

Bankruptcy May Help

Depending on the amount of the judgment, one of the best ways to satisfy a judgment is to clear the debt in bankruptcy.  The filing of a bankruptcy, either chapter 7 or chapter 13, will eliminate the underlying debt from the judgment against you.  As a result, the Michigan Secretary of State will reinstate your license or not suspend your license in the first place.  If the filing of the bankruptcy takes place after your license has already been suspended then you may need to pay reinstatement fees to the Secretary of State’s office.  If you file a bankruptcy before your license is suspended then it’s important to contact the Michigan Secretary of State and let them know you filed for bankruptcy so they do not suspended your license.

Criminal Fines and Prison Debts

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Currently there is a surge in public interest in the American prison system due to revelations of a disproportionately high prison populations compared to other countries. This interest is guided by concerns over racial factors and minor drug offenses contributing to the high numbers.  However, one of the aspects of the prison experience that is largely ignored is the debt associated with incarceration. It is not uncommon for an individual to get out of jail only to find out he is saddled with a large amount of debt , including criminal fines and prison debt, that even a bankruptcy cannot take care of.

Bankruptcy is provided to debtors to get a fresh start from their debts. Bankruptcy can be used to discharge or get into favorable payment plans for debts, including criminal fines and penalties. In this blog, we will outline a few types of criminal debt and how bankruptcy can help.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy often discharges all of a Debtor’s unsecured obligations absent some exceptions. The most relevant exception here is those debts that are a “fine, forfeiture, or penalty, payable and for the benefit for a governmental unit that is not compensation for actual pecuniary loss”. This statute, 523(a)(7) of the bankruptcy code effectively takes most criminal debts out of a Chapter 7 discharge.

Below is a breakdown of criminal debts dischargeable in a Chapter 7:

  • Parking fines
  • Costs as a result of a victims loss (such as condition of probation to repay debt not part of restitution order)
  • Juvenile restitution owed by parents
  • User and service costs not part of sentence
  • Costs of Prosecution (not in restitution order)
  • Collection costs not owed to government agency
  • Pre-trial incarceration debt
  • Bail bonds owed to private company
  • Interest to the extent the underlying debt is dischargeable

Below is a breakdown of criminal debts not dischargeable in a Chapter 7:

  • Criminal Fines (ie. Fines owed to the court related to a misdemeanor or civil infraction, traffic tickets)
  • Victim restitution
  • Costs (if part of the sentence)
  • Costs of Prosecution (if part of the restitution order)
  • Costs of Incarceration
  • Bail bonds owed to a state agency
  • Interest to the extent the debt associated with the interest is non-dischargeable

Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy is a payment plan where Debtors pay what they can afford for three to five years and get a discharge after the plan. A Chapter 13 bankruptcy gives debtors a “super discharge” which has a less amount of exceptions to discharge if the debtor completes their Chapter 13 Plan. A Chapter 13 Bankruptcy is a good idea for a debtor with large amount of criminal debts that are non-dischargeable in a Chapter 7. All criminal justice debt is dischargeable in a Chapter 13 except punitive fines or restitution as part of a sentence. This includes court costs, costs of prosecution and civil court and traffic fines.  Even debt nondischargeable in a Chapter 13, such as punitive fines or restitution, can be paid in a favorable 36 to 60-month payment plan in a Chapter 13 bankruptcy

If you are experiencing any debt related to a crime, don’t hesitate to contact an experienced bankruptcy professional to determine the best route to take care of it. Often individuals don’t realize that there are number of great solutions to take care of their criminal debts. Give our office a call at 248-237-7979 or fill out a form for a free consultation. 

 

Social Security and Bankruptcy

 

Today we will look at a few of the ways social security benefits and bankruptcy overlap. A number of recent studies have found that older people are making up an increasing amount of bankruptcy filers.  Many elderly people either receive social security benefits already, have social security benefits pending, or will become eligible for social security benefits in the near future. The result is an increasing overlap between social security benefits, creditors and bankruptcy.

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Different ways Social Security Income impacts Bankruptcy

Social Security Income (SSI) needs to be considered in a number of different areas on the bankruptcy petition.  It will impact Schedule B/C, Schedule F, Schedule I/J, and the means test and it will impact each of these areas very differently.

Schedule B and Schedule C

Schedule B is the area of the bankruptcy petition where your personal property assets need to be listed.  Schedule C is the area of the bankruptcy petition where you are able to exempt personal property from the reach of creditors or the trustee.

A bank account that only consists of social security income should be listed on schedule B and exempted on schedule C.  If the social security income was never co-mingled with any other funds then they will be completely exempt in bankruptcy.  Additionally, outside of bankruptcy, if the social security income has never been co-mingled with any other funds then creditors are prohibited from garnishing that account as your social security income is exempt from garnishment.  Although creditors can use other means of collection such as liens and seizures, this makes it much for difficult for them to collect on a judgment.

If you are owed social security back pay, this will also need to be listed on schedule B and exempted on schedule C.  Even if you have never received the back pay, but there has been a determination made that funds are owed to you, then it must be listed on schedule B.  Social Security back pay are completely exempt from the reach of creditors, but it is important to still list and exempt the asset.

Schedule I and Schedule J

Social security income also needs be considered when filling out schedule I and J.  Schedule I lists household monthly income.  This includes employment income, pension income, retirement income, and social security income.  This is important is because the Bankruptcy Court considers your ability to repay your creditors based on your current monthly income (schedule I) and currently monthly expenses (schedule J). After deducting your monthly expenses from your monthly income, there is too much money leftover, the court may require you to use a portion of that money to fund a chapter 13 plan.

Means Test

The Means Test is another area of the bankruptcy petition where social security income plays a role.  The means test is used to determine whether or not there is a presumption of abuse of the bankruptcy process.  It is based on your household income over the last six months in relation to your household size.  However, social security income is excluded from the means test.

This means there may not be a presumption of abuse of the bankruptcy process based on the means test, but schedule I and J show there is enough income leftover every month to pay back your creditors.  This creates quite a predicament and should be analyzed by an experienced bankruptcy attorney.

Overpayment of Social Security Benefits

Social security overpayment is considered an unsecured, non-priority debt.  This is similar to credit cards and medicals bills and should be listed on Schedule F of the bankruptcy petition.

Upon filing of a bankruptcy case, the collection activity must stop immediately against those owing overpayment of social security benefits.  The automatic stay also prevents the collection action against a co-debtor.  Therefore, even if a child or spouse has a debt listed in the petition the recovery against the child or spouse’s debt must stop also.

If an amount is received by the social security administration after the case is filed (which is not uncommon) it must be refunded to the client.

As with all debts, if the social security administration thinks the debts were obtain through fraud or false pretenses then the social security administration has the option to file an adversary proceeding to exclude the debt from being discharged in the bankruptcy.

As you can see, there are a number of different ways social security and bankruptcy overlap.  Please contact an attorney at our office if you have any questions.

Possible Changes in Debt Collection

elizabeth-warren

Senator Elizabeth Warren initiated the CFPB in 2010 as a response to the Late 2000’s recession and financial crisis.

On July 28, 2016 the Consumer Financial Protection Bureau (CFPB), the arm of the federal government responsible for consumer’s rights, issued an outline of proposals that would result in major changes to the debt collection process if accepted.

Documentation and Proof of Debt Requirements

Often correspondence received by borrowers is not even from the original creditor. Collection agencies routinely purchase debt at a fraction of the amount owed and begin collecting on the debt through phone calls and mailings. The CFPB proposals make it more difficult for the collectors by requiring documentation to prove the debt is still owed by the individual they are contacting. They must provide details such as the borrower’s complete contact information and specifically when the debt went to collections and the payment history. Further, these collectors cannot file suit until evidence is given that shows “the evidence of the amount of principal, interest, or fees billed, and the date of each payment made after default.”

Right to Dispute Debt

The CFPB makes it easier for borrowers to contest the collection notices by not having to jump through hoops to contact the collector. The proposal requires the collectors to provide a form that the borrower can fill out to dispute a debt. If the borrower disputes the debt, the burden of proof shifts to the collector to prove that the borrower is incorrect on his dispute.

Zombie Debt

At times borrowers get collection notices on debt that is so old that the statute of limitations has expired for a lawsuit on the debt. For this type of debt, the CFPB has proposed that that the collector must indicate that the debt is “too old for a lawsuit” in their correspondence. Further, the collector is not allowed to take the borrower to court on the old debt.

Limitation on Contact

The CFPB proposes that the collector can only contact borrowers six times a week in any form of correspondence, including phone calls, regardless if picked up, mailings, and emails. After initial contact is made, the collector is only allowed one additional contact per week with no more than three attempts.  At any point, if the borrower requests that they not be contacted, the collector must cease and is prevented from making further contact.

Although these proposals have not been accepted, it is good news for borrowers who are facing a barrage of phone calls and are confused about what entity they owe and for how much.

If you are experiencing debt collection that is against the law or are overwhelmed, contact an experienced debt professional at (248) 237-7979.

Solutions for Wayne County Delinquent Property Taxes

Many individuals, mostly in the city of Detroit, have found themselves behind on property taxes owed to the  Wayne County Treasurer and face the risk of losing their home.treasurerlogo

 Timeline

-A city tax bill is sent out to the homeowner in both July and December for both Summer and Winter taxes. Property taxes are assessed based on the property’s State Equalized Value on their tax bill.

-In March of the following year, the taxes are moved to the County Treasurer. An administration fee of 4% is assessed along with an additional 1% per month interest as long as the taxes are unpaid.

– In October a $15 fee is applied to the parcel.

– In March of the second year, the property is deemed forfeited. Fees of $201 are assessed and intereste jumps from 1% to 1.5% per month.

– In November of the second year, the properties are listed as subject to foreclosure the following March.

– In March of the third year, the court enters a judgment of foreclosure. Property owners have  one month to redeem.

– In April of the third year, the property is foreclosed and title is passed to the Treasurer and sold in the fall at auction.

Solutions

The Treasurer is always willing to enter into a payment plan with owners. The plan usually requires a certain amount down along with a monthly payment obligation. The standard payment arrangement is providing a lump sum of 60% for all foreclosed taxes (currently 2013 and earlier) and a monthly payment agreement to pay off the remainder in a reasonable period of time.  The Treasurer provides a form for the stipulated payment agreement. We highly encourage our clients to explore this avenue first. Call (313) 224-5990 or visit 400 Monroe, 5th FloorDetroit, MI 48226. Although very busy, the staff is friendly and accommodating.

The Treasurer also provides a hardship option for those going through financial distress allowing for an extension.

If the Treasurer’s payment plan is too steep, a home owner can file a Chapter 13 Bankruptcy to pay off the taxes over the course of a 5 year plan. They may be able to reduce the amount of taxes if the value of the home is less than the taxes owe.

Appealing the property tax bill is also a consideration. Wayne County Treasurer assesses taxes based on the State Equalized Value that was issued years ago when the values of properties were much higher. As a result, the homes are worth much less than what they are being taxed on. The ACLU and NAACP have filed a lawsuit against Wayne County Treasurer asserting that the Treasurer has violated federal law with inflated tax assessments.

Step Forward Michigan has offered programs to help pay down delinquent taxes if certain qualifications are met.

 

Our office deals with property tax issues daily. If you need advice on how to handle past due property taxes or are at risk of foreclosure, contact an experienced debt professional at 248-237-7979.

Payday Loans Are a Terrible Idea

Payday-loans2

Payday loans, or cash advances, are used by twelve million Americans each year, according to a recent study by the Center for Financial Services Innovation.  Payday loans are frequently used to cover necessary living expenses such as water, gas, and electric bills, along with rent and car payments.  The loans work like this: you go into a lender and exchange for cash you give the lender your banking information and allow them to withdraw the loan and finance charge on the next payday.

If the person is unable to pay the full amount (loan plus finance charge) then the individual has the option of only paying the finance charge.  In Michigan, the finance charge is limited to 15% on the first $100, 14% on the second $100, 13% on the third $100, 12% on the fourth $100, and 11% on the fifth and sixth $100.

Why payday loans and cash advances are a terrible idea:

  1. The Interest rate makes them unaffordable

In Michigan, the finance charge on the payday loan is astronomical.  Although the numbers above don’t look astronomical, you have to remember that these rates are for a two-week loan period.  The interest charge on a $100.00 loan is $15.00.  The daily interest charged ($15/14) is $1.071429.  If this is converted into an annual percentage rate (APR) it is: $1.071429 x 365 days in a year = 391%.

  1. Most borrowers pay more in fees than they received in credit

So, typically the person takes out a payday loan of $600.00 the total finance charge is $76.00.  If the person only pays the $76.00 on their next payday, the loan and finance charge will roll over to the following pay period.  This can go on until the loan and finance charge are paid in full.  The average individual typically takes five months to pay off the loan and finance charge.  This means the average person will end up paying over $700.00 on a loan of only $600.  THE PERSON WILL PAY MORE IN FEES THAN THEY RECEIVE IN CREDIT.

  1. Additional Charges

Now, if the customer does not pay the finance charge then the lender can withdraw the funds from the person’s bank account.  If there are insufficient funds to cover the loan and finance amount there will be additional charges.  Your bank will charge you for the non-sufficient funds check and the payday lender can charge an additional $25 for a returned check fee.  These two fees will be on top of the balance owed in the original loan agreement.

  1. Cash Advances may not be Discharged in Bankruptcy

If you take out a payday loan, or cash advance, prior to filing for bankruptcy it may also be an issue.  If the cash advances total more than $925 within the 70 days prior to filing for bankruptcy, the amount is not dischargeable in the bankruptcy.  This amount needs to be taken from one cash advance place, not multiple.

Alternatives

If you are unable to make ends meet temporarily, there are alternatives.  First, you should ask the creditor for more time to pay your bills.  Then, before taking one of the following alternatives, you should speak with an attorney to discuss your legal options.

Lastly, before taking out a payday loan, you should consider a loan from a friend, family member, bank, or credit union.  You could also ask for advance pay from your employer.

The bottom line is that payday loans are almost always a terrible idea and should be avoided at all costs.

For more information about pay day loans or help discharging them in bankruptcy, please contact our office at 248-237-7979.

Bankruptcy and Your Spouse

How Bankruptcy Affects Your Spouse

As more and more married couples keep their finances separated, people frequently ask if bankruptcy will affect their husband or wife.  Since nobody can MAKE you file for bankruptcy, a number of our married clients end up filing bankruptcy without their husband or wife.  Usually the non-filing spouse will want to know “How does the affect me?”.  The impact a bankruptcy filing may have on your spouse varies based on a number of different factors.  In this blog we will explore some of the different factors that may or may not impact a non filing spouse in bankruptcy.

Joint Debts

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Donald Trump has filed many bankruptcies for his companies, but never a personal bankruptcy. If he had,  he would be tremendously concerned on how it would impact his beautiful wife, Melania.

One of the first things to determine is whether or not any of the debts are joint debts.  A joint debt is a debt where more than one personal is liable.  For example, if a husband and wife go car shopping, purchase a new vehicle and both sign for the auto loan.  In this case, the husband and the wife would both be liable for the entire amount of the auto loan.  So if the car were to be repossessed at a later point then the creditor could try to collect from either the husband or wife.

Now, if the husband decides to file for bankruptcy and discharge his liability to the creditor the wife is still liable for the full amount of the debt.  Most spouses do not want to stick their significant other with a large sum of debt they initially agreed to pay together.  Therefore, it’s vital to determine whether the couple has any joint debts so as to not inadvertently stick one spouse with all the debt.

One situation to be careful of is in the case of an authorized user.  Although both husband and wife may have access to a line of credit, it does not mean that both of them are liable for it.  Frequently, spouses allow their significant other to be an authorized user on a credit card.  As an authorized user you are not liable for the debt at all.  For example, if the husband opened up a credit card and allowed the wife to be an authorized user, the husband is still liable for 100% of the debt.  In this case, it may make sense for only one spouse to file.

Joint Property

Jointly owned property is another factor that may impact a spouse when filing for bankruptcy.  As with any bankruptcy it’s important to know what property you own and in what capacity.  Married couples frequently own homes, cars and boats jointly.

Now, if one of these assets has too much equity in it then it may impact the non-filing spouse.  If the debtor cannot exempt all of the equity in the asset then the trustee has the right to sell the entire asset, give the non-filing spouse her half and use the unexempt portion to pay back some of creditors.

If the non-filing spouse owns something in their name only then the bankruptcy will not have any impact on that piece of property.  Therefore, it is important to establish how property is owned in order to determine how it may impact your spouse.

Household Income and Expenses

If only one spouse is going to file for bankruptcy, the bankruptcy Court will still look at the entire household’s income and expenses.  This will require the non-filing spouse to turn over the paycheck stubs for the last six months in order to determine whether a the filing spouse is eligible for a Chapter 7.

If the non-filing spouse makes significantly more than the normal income limits of a Chapter 7 there are still ways to get a person qualified for a Chapter 7.  By using the marital adjustment on the means test to include the non-filing spouses expenses, the household income can sometimes be lowered enough to qualify for a Chapter 7.

This process can become quite complicated and should be discussed with your attorney prior to filing.

Charge Offs

What is a Charge Off?home-restore-your-credit-

Past blog posts have explained the importance of your credit score.  Your credit score can have an impact on your ability to get a job, insurance rates, residential leases and utilities.  There is a myriad of information on your credit report, from creditor names, payment history, recent balance, account status and balance history.  All of this information is used to help determine your credit score.

When we pull our client’s credit report and review it with them, the term charge off often needs to be explained in more detail.  This blog post will explain what a charge off is, what a charge off means and the impact a charge off has on your credit score.

The term “charge off” can usually be found under the status section of your credit report.  It will normally say something along the lines of “account charged off” or “$1,000 written off”.  After 180 days of not being able to collect on an account, a creditor may list the status of an account as charged off.  The creditor has given up on being repaid according to the original loan terms.  The creditor has given up on being repaid under the original terms of the loan and written the loan off their receivables as a loss.  Now, some of our clients think that this means the debt is no longer owed.  This is NOT true.

Most creditors will sell this “charged off” or bad debt to a debt collection company for pennies on the dollar.  At this point, the collection agency will attempt to collect on the unpaid portion of the debt.  Now, the debt will be reported as “charged off” on one spot on your credit report and in collection on another spot – two dings to your credit report.  Both of these dings will stay on your credit report for seven years from the date of your first missed payment.

If the debt is sold to a collection company then you no longer owe the original creditor and any payments you make should be to the debt collection company.  If you pay the account then the status of the account should be changed to show that it was a paid charge off or paid collection.

A charge off will generally have a negative impact on your credit score; however the extent of the impact is often dependant on other factors as well.  If your credit score is low due to your debt to income ratio then paying off the debt will likely increase your credit score.

If you are unable to pay the debt in full, you may be able to negotiate with the original creditor to have the charge off removed from your credit report.  While the original creditor may not be able to delete the account entry and the payment history will still show up, it may be able to change the status to a more desirable status such as “paid in full”, “paid as agreed”, “account closed” or “closed”.

As always, make sure you check your credit report for accuracy.  Check out our other blogs to see how to dispute inaccurate information.