Judson E. Crump, PC

Alabama’s Exemption Statute – Why so stingy? – Alabama Debtor’s Lawyer Judson E Crump

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DID YOU KNOW? Alabama (No Longer) has the weakest exemption statute in the country.

This is a correction to a previous article I wrote, which has been made necessary by a positive change in Alabama law.

In January of 2015, I wrote the following article about Alabama’s exemption statute:

“What’s an exemption statute?

Say you get sued for a credit card bill.  Or a medical bill.  You either fail to answer the complaint or you lose a trial, and the court enters a judgment against you for $10,000.  What can that creditor now take from you to get it?  Wages can be garnished.  But what if you have no wages?  They can zap your bank account, but there is a limit: you are allowed to claim up to $3,000 of your property as exempt from execution.  This means they can’t take it.  You have to file a document with the court called a Claim of Exemption to ensure that this specific item of property (the bank account) is protected.  But once you do that, they’ll have to look elsewhere to satisfy a judgment.

The law that allows you to protect a chosen $3,000 of personal property is called the exemption statute.  Ours is found at Alabama Code Section 6-10-1, et seq.  

Our exemption statute was written in 1876.  It was part of the Alabama Constitution, really.  Article XIV of the Alabama Constitution of 1876 provided that “the personal property of any resident of this state to the value of one thousand dollars, to be selected by such resident, shall be exempted from sale on execution, or other final process of any court…”

So back in 1876, Alabama citizens could protect $1,000 of personal property from their creditors.  What is that today?  $21,000.  Yet our exemption statute today allows us to protect only $3,000.  So during the past 138 years, our protections for people in financial trouble have dropped to 1/7th (that’s 14.2%) of what we gave struggling working folks back in 1876.  We like to think that legal rights and government regulation have only increased since 1876.  Not so, my dear friends.

Similarly, the homestead exemption was $2,000.  In today’s money, that is $43,000.  Today it is $5,000.  So the past 138 years has been even worse for people trying to protect their homes.  Their protections have gone down to less than 1/8 of what they were back in the days of Jim Crow.

I hereby call on the legislature to pass a law that automatically updates the state’s exemption statutes each time the Crimson Tide wins a national championship, such that for every crystal football (or historical equivalent) added to the collection in Tuscaloosa, the amount of exempt personal and real property increases by $1,000.  If this policy were enacted in 1900, the citizens of this fair state would enjoy not the bullshit $3,000 and $5,000 (personalty and realty, respectively) exemptions that now drive them into penury, but $15,000 of personal property and $15,000 of homestead exemptions.  This would put us about right in the middle of the pack nationwide as far as debtor-friendliness goes.  And it would be attributable to the Bear and Saint Nick.  Roll Tide.”

To my shock and delight, the Alabama Legislature has changed the law.  On June 11, 2015, Governor Bentley signed Ala. Act No. 2015-484, which raised the homestead exemption to $15,000, and the personalty exemption to $7,500.  Even better, the law now requires these amounts to be adjusted for inflation every three years.  This improves the protections that our laws provide to struggling working folks.  Now, Alabama debtors have protections that are similar to those in the rest of the country.

At this point, I wonder something: the legislature re-wrote the exemption statute in June 2015 – five months after I published my article.  Coincidence?  Probably.  I’m 99% sure that no member of the Alabama legislature cares what I think.  But I’m happy for all of our working folks nonetheless.  A few years ago, I’d have never believed Robert Bentley would do anything for the poor.  Turns out, I was wrong on that.  Thank God.

Medical Bills are the Biggest Drag on US Consumer Credit Scores – Alabama Consumer Credit Lawyer Judson E Crump

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“If you have a bill in collections that is dragging down your credit score, chances are high that it’s medical.”

So says a recent Washington Post article about the US Consumer Financial Protection Bureau’s recent study of medical bill collections.

The study found that over half of the delinquent accounts that are reported against US citizens’ credit reports were medical bills.  And there were a LOT of people – about 15 million – whose only delinquent account on their credit report was a medical bill.

Medical bills are often hard to prove.  Very often, there is no written contract.  The provider may have not submitted the bill to insurance properly or timely, and therefore lost the right to collect from insurance and instead just decides to try to collect directly from the patient.

And a short visit to a single hospital can spawn a dozen separate bills – one from the hospital, one from each lab that handled your blood, one from each doctor who either saw you or your X-rays, one from a pharmacy, and God knows what else.  You may have never encountered these people and have no idea who they are, but they’re still asking you for money.

And if you ask for verification of the amount allegedly owed, you may not ever get any information.  The whole process is very mechanical and there’s often little to no human involvement in the collection process.

So what do you do if you have strange or inflated medical bills showing up in your credit report?

First, you should contact the medical provider and ask for an itemization of the bill.  How much are they charging you and why?  Will they give you a discount for what your insurer won’t cover?

Second, you should send a written dispute to the credit reporting agencies.  Tell them how much you legitimately owe and ask them to report nothing more than that.

Third, NEVER pay money just to get something off your credit report. A LOT of collection agencies report bogus amounts just to coerce you into paying.  If you owe a hospital $60, a collector may report that you owe $100, just because they’re betting that you’ll pay them the full amount to clean up your credit records.  Don’t fall for this.

Fourth, don’t be afraid to challenge them if they’re asking you for an unreasonable amount.  If they were to take you to court, they’d have to prove that the charges were reasonable and medically necessary. If they inflate the ‘price’ of services to compensate for discounts they provide to insurers, then they can’t just force you to pay whatever they want to put on some bill.

CACH, LLC Credit Card Collection Suit Defeated – Alabama Credit Attorney Judson E Crump

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One of our clients was sued by CACH, LLC, a debt buyer seeking to collect $2463 on an alleged credit card owed to GE Capital Retail Bank (GECRB) for an HHGregg Credit Card.

We went to trial and defeated the lawsuit at trial in the District Court of Mobile County, Alabama.

The Order entering judgment for my client is here:

CACH LLC Lawsuit Defeated

Alabama’s Lemon Law – The Basics – Alabama Lemon Lawyer Judson E Crump

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New Car Lemon Law in Alabama

It can happen to you: you test drive a car and everything seems fine, so you pay your down payment and sign a contract and drive your new vehicle home.  The next day it breaks down on you.  You’ve been sold a Lemon.  What do you do?

First, let’s clarify something really important: the actual “Lemon Law” only applies to new vehicles.  If you bought a used car and it turns out to be a piece of junk, you MAY have a claim for breach of warranty, fraud, or breach of contract, but you don’t have Lemon Law rights.

Alabama’s Lemon Law is Ala. Code 8-20A-1, et seq.  And what the lemon law essentially says is this: if you buy a new vehicle that has mechanical problems, you don’t have to spend years driving an unsafe car while they try to fix it.  If you’ve given them a reasonable opportunity to fix the vehicle and it still doesn’t work, then they have to give you a new vehicle OR a full refund.

More specifically, the law says that a vehicle which does not conform to the express warranties of the manufacturer must be fixed if you notify them of the defect within a year of buying the vehicle OR before it gets 12,000 miles on it, whichever is first.

So here’s how you exercise those rights.

1. Notify the Manufacturer and Dealer.

First, if you have a new vehicle with a major defect, you need to notify the manufacturer.  Most warranties require you to take the vehicle to an authorized dealer for repairs.

If they fix it, great.  If not, then you should give them a second chance to fix it.

2. Give them some time to fix it (but not too much time!)

If they’ve made 3 repair attempts and it still isn’t fixed, then the law presumes the vehicle is a lemon.

If the vehicle has been in the shop for more than 30 days (if you add up all the repair attempts), then the law presumes it is a lemon.

Once you’ve given them either 3 tries or 30 days of shop time to fix the vehicle and it the defect still exists, it is time to exercise your lemon law rights.

3. Send a Certified Mail Demand for Repair to the Manufacturer

Yes, even after they’ve had 3 tries and 30 days to fix the vehicle, you have to give the Manufacturer (NOT the dealer!) one last chance to fix it.  It is a lot like Little Bunny Foo-Foo.  They have 7 days to write you back with a recommended repair facility.

4.  Give them one last chance.

They have 14 days to fix it in their last chance at repair.  If they don’t then they have to give you a new vehicle.

5.  Demand a New Vehicle or Full Refund.

If their last chance didn’t fix it, they have to give you a new vehicle of similar model or a full refund.  The refund has to include all taxes, finance charges, and other fees.

6.  Sue the Manufacturer.

If they refuse to give you a new vehicle or full refund, then you can take them to court to force them to give you a new vehicle, compensate you for all damages, and pay your attorney’s fees.

BEWARE THE 2 year/24,000 mile deadline!

Finally, you need to know that steps 1 through 5 have to occur within 2 years of you obtaining the vehicle or 24,000 miles on the odometer.  If it is a defect that can lay hidden for a few months before resurfacing, then you have to be very persistent in demanding your repairs.  DO NOT WAIT.  If something is wrong, take action immediately and don’t try and see how long you can live with it.

Adverse Action: What it means, Why it matters. (VIDEO) Alabama Consumer Credit Attorney Judson E Crump

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Whenever you Apply for Credit or any sort of Installment Loan, you are supposed to receive a written notice from the creditor telling you if you were approved, denied, or given a counter-offer.  This is more important than you think.  Here’s why.

There’s this thing called the Adverse Action Notice.  It’s a letter that anyone who receives a consumer credit application must send to the applicant if they do anything but approve their application on the terms requested.  Here’s what they look like:

This one complies with FCRA and ECOA - it tells the applicant that he doesn't have enough credit history to get approved for the loan he wanted.
This one complies with FCRA and ECOA – it tells the applicant that he doesn’t have enough credit history to get approved for the loan he wanted.
This letter was sent to a client who had no idea that she'd ever applied for a loan with Cap One. She went with another finance company because the car dealer didn't tell her about Cap One's offer.
This letter was sent to a client who had no idea that she’d ever applied for a loan with Cap One. She went with another finance company because the car dealer didn’t tell her about Cap One’s offer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Both the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act require adverse action notices, but the same letter can serve both purposes, and the ECOA requirements are more important.

Just like the name says, the Equal Credit Opportunity Act was originally intended to prevent credit discrimination by forcing creditors to tell people the real reason why they were denied a loan or offered a 12% interest rate when everybody else got a 7% interest rate.  It’s really hard to discriminate against divorcees or blacks if you’re not allowed to just deny without an explanation.  It still does this, though I like to think that our society has progressed beyond the point of people being mistreated solely because of their color, sex, religion, or whatever.

But the Adverse Action Notice has two very important functions that Congress probably didn’t foresee back in 1974.

1.  It alerts you to problems with your credit report.  Because the adverse action notice has to tell you why you were denied, (i.e. “You have too much debt already.”), it can alert you to credit problems that you didn’t know you had.  For instance, if you get a denial letter that says your auto loan application was denied because you had “Too many recent inquiries,” and you know for a fact that you haven’t applied for any sort of credit in 2 years, then you know that something is wrong, and you’ve been alerted to a possible identity theft issue that you need to take care of ASAP.

2.  It warns you of fraud by potential creditors and salespeople.  This happens most often in the context of auto sales, but it can just as easily happen with mortgage lending (where there are much bigger consequences).  How?  I’ll use an example to show you why.  You go to a car dealer shopping for a car.  You pick one or two models you’re interested in and you offer a $3,000 down payment and you ask to finance the remaining $18,000 at 8% APR over 48 months.  You fill out a credit application and you hand it to the dealer.  He uploads it to his computer system and submits the loan to potential finance companies.

What’s supposed to happen next is this: he sends your application to a four potential lenders, and they respond.  Whichever one gives you the best deal gets the contract.  You get the car.  The dealer sells a car.  The finance company gets a new customer paying them 8% APR for their loan.

But what can (and sometimes does) happen is this: three lenders reply, two of them offer you financing at 9%, and the other offers you financing at 12%, but is willing to finance a bunch of junk charges like a $1800 service contract that cost the dealer $600 and pay the dealer a bonus $500 for sending you their way.  The dealer then tells you that you’ve been approved for 12%, and that’s all they can do.  You believe him and you take the deal.

30 days later, you get two letters from finance companies you never heard of, announcing that they got your applications, but only offered you 9%, and that they haven’t heard from you since then.  You think WTH?  I signed up for 12% when I could have gotten 9%?  So now you know you’ve been screwed.  That’s what is supposed to happen. Now you can do something about it.  Like calling a lawyer in Alabama who can help you take action to defend your rights.

Credit Acceptance Judgment Vacated for Fraud upon the Court – Alabama Consumer Finance Attorney Judson E. Crump

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Default Judgment Vacated for Fraud & Misrepresentation

 

 

This case was a particularly important one, in my opinion.  I’ve written before about cases where I was able to reverse a default judgment after it had been entered because the Defendant was never served with the complaint.  That is by far the most common way to reverse a default.  But not the only way.

My client bought a car in 2007.  It had a 24% APR and she reliably made her payments for about four years.  Then the car broke down and since it was sold to her “AS IS – No Warranty,” she had to pay for the repairs out of pocket.  The repairs would have cost $4,000.  The car wasn’t even worth that much.  So she gave it back to the finance company – Credit Acceptance Corp.

Three years go by.  She gets sued by Credit Acceptance – they say the balance on the loan is $11,071.61.  She calls the collection lawyer to try and make payment arrangements, but they wouldn’t accept any offer she could afford.

So she didn’t answer within the 30 days allowed by Alabama law.  Credit Acceptance moves for a default judgment.  They knew that they were in the superior position – my client hadn’t defended herself, so they were going to get a judgment without having to really prove their case.  That’s how default judgments work.

But when the judgment was entered, it was not for the $11,071 she’d been sued for, but for over $19,000!  How?  They had asked for interest at 24% APR beginning January 1, 2012.

But the car hadn’t even been sold at a post-repo auction until July 2013!  You can’t calculate a deficiency balance until you have sold the car.  It just isn’t possible.

So how did a judgment get entered that was so obviously wrong?  Because Credit Acceptance had one of their employees file a false affidavit with the court.  Their affidavit stated that the amount owed on New Year’s Day 2012 was $11,071.61, when in fact that was the highest amount the debt could have been in July of 2013!  So that is 19 months of interest (at 24% interest!) that they had no right to claim, yet in a sworn affidavit, they were seeking.  In other words, Credit Acceptance blatantly lied to the court to try to steal over $4,200 from my client.

I filed a motion to set this judgment aside, and it was granted.  Even the collection lawyer, to his credit, realized that something was way off with the affidavit.

Car Repossessed After a Spot Delivery Sale went Wrong? A few Defenses – Alabama Consumer Fraud Attorney Judson E. Crump

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Spot Delivery Sales are Often Illegal.  But even when they’re not, you still have rights.

 

If you have credit problems in your past, then there is a chance you have been subject to a spot delivery auto sale scheme.  Spot Delivery?  What is spot delivery?  A spot delivery is a certain type of car deal where the buyer enters into a tentative or conditional sales agreement to buy a specific vehicle on agreed upon terms, but subject to final approval by a third-party finance company.

Basically, here’s how they work:

  1. You find a car you like and negotiate the terms of purchase with the dealer.
  2. You sign a conditional sales agreement – the condition being that if the dealer cannot find financing for the transaction, the deal is off.
  3. The dealer sends your credit application to several finance companies, hoping one of them will buy it.
  4. If one of them accepts your contract, then the deal is final and you’re good.
  5. If none of them accept your contract, the dealer will do one of two things: either a) they’ll try to rewrite the contract on worse terms to get a lender to accept it (like, maybe they wouldn’t approve you at 18% but they’ll approve you at 22%), or b) the deal is cancelled.
  6. If the deal is cancelled, then the entire contract is void.  You have to return the vehicle in good condition; they have to give you all your money back and give you your trade in (or the exact trade-in value) back.  They cannot deduct from your down payment except for a reasonable charge for the miles you put on the vehicle.  Which should never be more than a couple hundred bucks.
  7. If they try to rewrite your contract, you need to know why, and you need to be sure that the contract had an enforceable spot delivery clause.  I recommend contacting an experienced consumer protection lawyer to review such a deal.

Seems simple, right?  Not really, and the more complex a deal is, the more opportunities there are for fraud.  Particularly in car sales.  So here are a few things to watch out for:

  • EVERY FINANCE COMPANY AND DEALERSHIP WHO DENIES YOU CREDIT MUST PROVIDE YOU A WRITTEN NOTICE OF DENIAL WITHIN 30 DAYS OF RECEIVING YOUR APPLICATION.  THE NOTICE MUST TELL YOU WHY YOU WERE DENIED.  If you didn’t get a notice within 30 days of them receiving your application, they are violating the Equal Credit Opportunity Act, and you need to talk to a lawyer about that.
  • Even if you applied for the loan in person, they still have to give you a written notice of their decision.
  • If they don’t approve you FOR THE PRICE, FINANCE CHARGES, AND INTEREST RATE you requested, then it’s a counteroffer and they have to send you the notice telling you why they didn’t grant the credit you asked for.  Unless you accept their counter.  If you go with another lender, then they still have to tell you why.
  • The Spot Delivery Agreement (it may be called a “bailment agreement”) should be clear and conspicuous and part of the sales contract.  If it’s on a separate piece of paper, you should have an attorney review them.
  • If they take the vehicle back, they have to give you your down payment and trade-in back.  If they’ve sold your trade-in, make sure that they properly acquired title and that they give you a check for the full amount of the contract trade-in value.
  • If they repossess the vehicle, they have to let you get your property out of the vehicle.  They can’t keep your stuff.
  • If they repossess the vehicle, they cannot hold you liable for any deficiency balance on the contract (because there was no contract, remember!).

 

It is possible for a Bailment Agreement/Spot Delivery sale to be done in a manner that is 100% legal.  But they usually aren’t.  If you think that something was done wrong, you need to talk to an attorney ASAP.

 

What Happens When You Hire Freedom Debt Relief – Alabama Consumer Credit Attorney Judson E Crump

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Freedom Debt Relief Credit Counseling Customer Stuck with Big Judgment in Alabama Credit Card Lawsuit

Freedom Debt Relief advertises itself as a way to avoid Chapter 7 or Chapter 13 Bankruptcy by negotiating discounted debt settlements for people with lots of credit cards, medical bills, personal loans, or other unsecured debt.  Like all debt settlement companies, they aren’t attorneys, and they cannot do anything you can’t do for yourself.  Here’s a very typical, but unfortunately real example of what happens when you trust your finances to a debt settlement outfit like Freedom Debt Relief.

In the District Court of Mobile County, Thomas B— was sued for $3,873.38 by Capital One.  Case No. 02-DV-2014-902455.  After he was served with the summons and complaint, he sent a response to the credit card lawyer.  He said:

“In order to avoid bankruptcy, I turned to Freedom Debt Relief for credit counseling and debt payment direction.  We have given them our power of attorney to deal with all of our creditors…please have all documents and correspondence going forward passed through them.”

The poor guy.  He had apparently signed up with Freedom Debt Relief, who promises that

“Once you enroll in the Freedom’s Program, we become your credit advocate, working solely on your behalf.”

https://www.freedomdebtrelief.com/how-it-works

So Thomas naturally assumed that when one of his creditors decided NOT to work with Freedom Debt Relief, but instead to sue him, he simply trusted that his “credit advocate” would step in and help him.

Unfortunately, that is not what happened.  Since Freedom Debt Relief is not a law firm, they couldn’t step in and help.  So a few weeks after being served with the lawsuit, the Court entered a judgment against Thomas B— – for $3,873.38 plus court costs!  This is all a matter of public record, and the truth is there for all to see.

So not only did Freedom Debt Relief fail to help this man, he ended up with a judgment against him for the full amount of the alleged debt!  As a public record, the judgment can stay on his credit for up to 10 years, unlike most accounts which are limited to 7 years under the Fair Credit Reporting Act.

If Mr. B— had only hired a real lawyer to help him, he would not have had to face his collection lawsuit alone.  He would have had real advice and real representation.  But we lawyers don’t have the advertising budgets of big nationwide corporations like Freedom Debt Relief.  Hopefully others will learn from his experience.

If you are thinking about hiring Freedom Debt Relief or any other debt settlement company: think long and hard before you sign up with them!  They cannot do anything you can’t do.  They may be working for the credit card companies.  Your creditors are NOT obligated to deal with them instead of you.  They can’t do a thing to protect you if your creditors decide to take you to court.

FRB: Foreclosure Only Drops Your Credit Score By About 6 Points – Alabama Consumer Credit Attorney Judson E Crump

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A Foreclosure Does Not Hurt Your Credit Score Nearly as Much as You may Think.

Have you ever heard someone tell you that a foreclosure will ruin your credit score?  From a TV Commercial?  A Realtor?  A Banker?

They’re wrong.

The Federal Reserve Bank of Cleveland undertook a study to determine if these Cassandric prophesies actually turned out true for real people.  Turns out, the banks and realtors and credit repair companies are worse at making predictions than Miss Cleo.

This paper shows the opposite: foreclosure itself has a very limited impact on a borrower’s
credit score in most cases. Using individual-level credit report data that has been merged with
loan-level mortgage data it is estimated that the very first missed mortgage payment leads to
the biggest reduction in credit scores. The effect of subsequent loan impairments on the credit
score is increasingly muted. Specifically, based on the estimates, the impact of a transition from
current to 30-day delinquency on the credit score is a decline of 51 points (relative to households
that stay current and have otherwise comparable observable characteristics). For a transition to
60-day delinquency, 90+-day delinquency, and foreclosure, the effect is a 25-, 14-, and 6-point drop, respectively.

Yes, you read it right.  Foreclosure only drops your score an average of 6 points.  Why?  Because once you’ve missed a payment, you’ve done most of the damage already.  There is barely any practical difference between being 2 months late and having actually lost your home in foreclosure.

You can download the report at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2514370#%23

This isn’t to say that you should be excited about losing your home in foreclosure.  Not at all.  But as I always advise my clients: NEVER BASE FINANCIAL DECISIONS ON HOW YOU THINK IT WILL AFFECT YOUR CREDIT.  If a bank, realtor, foreclosure rescue operation, or anyone trying to make money off you says that a short sale or deed-in-lieu or some “foreclosure alternative” is going to help you because a foreclosure will kill your credit for years to come, they are lying to you.

Sometimes, it is best to let the bank take their house back and just move on.  If so, that’s what you need to do.

Video Q&A: The cleverest corporations that break consumer protection laws: Credit Bureaus – Alabama Credit Attorney Judson E Crump

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Alabama Credit Reporting Attorney Judson E. Crump discusses why he thinks credit bureaus are relatively smart businesses to fight in court.

To summarize:

Though the major consumer reporting agencies* make mistakes all the time, actually taking them to court can be tricky because they are specialized in their field and have experience from decades of business and thousands of lawsuits behind them. They know how to deal with FCRA litigation, have very good professional witnesses, and don’t hire bad law firms.

Proceed cautiously, but don’t be intimidated.

*credit bureaus, credit report companies, credit reporters, these all are defined by 15 U.S.C. 1681 – the Fair Credit Reporting Act – as “consumer reporting agencies,” so that is the term I use for them as well.

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