politics

Don’t Let the Coronavirus Rush You Into Bankruptcy!

March 25, 2020 by Attorney Judson E Crump Leave a Comment

The current COVID-19 outbreak has caused massive layoffs and work shortages here in Alabama, just like everywhere else. Stores are closed, bars and restaurants aren’t making any money, and you can’t find the good toilet paper anywhere. Congress did finally pass an emergency bailout bill, but even getting an extra $1,200 won’t be enough to cover your lost wages, especially if you were working in a bar, restaurant, or store. A LOT of bankruptcy lawyers are amping up their advertising, hoping to convince you to go ahead and file for bankruptcy before your creditors start hounding you for the money. But I’m here to tell you to wait. Stay calm and think about this first. At least consider these three things before you rush into a bankruptcy lawyer’s office:

The Bailout Bill has increased unemployment benefits that you may be able to take advantage of to weather the storm. Part of the Coronavirus bailout bill is a federally funded $600/week bonus that you can get on top of your normal state unemployment benefits, AND an additional 13 weeks of unemployment. So if you’ve found yourself unemployed, go ahead and apply for unemployment benefits and see if that will get you enough to cover the next couple of months.

You May Fail the Chapter 7 Means Test. In order to qualify for a discharge in Chapter 7 bankruptcy, you have to provide your past six months’ pay stubs to the Bankruptcy Trustee and undertake a rigorous monthly income and expense calculation to show that, based on your most recent income, you can’t afford to pay your creditors in Chapter 13 (debtor’s reorganization). The mathematics are actually quite complex, but suffice it to say that if your past six months’ income was higher than the median in your state and you don’t have a lot of allowable expenses (like child support or secured debt payments) you could be forced into Chapter 13 instead, which requires you to devote 5 years of payments to your creditors. Because the means test calculation is determined mechanistically based on your past six months’ pay stubs, you could fail the means test even if you are currently unemployed! The wiser strategy in many instances may be to wait until you’ve been unemployed for a couple ofmonths and then file Chapter 7 when your 6 month average income is lower. Chapter 13 is fine for many cases, but it usually ends up being more expensive than Chapter 7 and it takes years to complete, as opposed to a few months.

Many mortgage companies are suspending foreclosures during the pandemic. Fannie Mae and Freddie Mac recently announced that they are suspending foreclosures until the end of April, and that date could possibly be extended in the future, depending on how long the nation remains in crisis mode. Most home mortgages in this country are backed by Fannie and Freddie, so if you fall behind on your mortgage payments, you may be able to find relief from foreclosure without resorting to Chapter 13, which is the traditional legal remedy for those seeking to stop a foreclosure. Most bankruptcy lawyers pitch the ability to stop a foreclosure as one of the chief benefits of Chapter 13 (and it is indeed a powerful remedy), but why take such a drastic step if you can avoid it by taking advantage of their voluntary programs? The bottom line is this: if foreclosure is the main reason you’re considering bankrupcy, don’t make a rush decision. See if your lender is one of the lenders that are stopping foreclosures right now. Apply for a hardship loan modification.

Finally, I need to point out one situation that may require you to file bankruptcy: if you are facing a repossession. Unlike the mortgage companies, auto lenders are generally much less generous when it comes to providing relief from repossessions. Foreclosures are slow and costly, so the mortgage companies have a financial incentive to avoid them if they can. Repos, however, only cost the lender a few hundred dollars and provide immediate value in the form of your car. As far as I know, the Coronavirus Bailout Bill did not provide any relief from repossessions (though in my opinion, something like this should have been included in the bill, which is mostly just a massive corporate welfare spending spree). So if you are behind on your car note and your vehicle is out for repossession, you may indeed need to file for Chapter 13 to keep your car.

FAIR Act Passes in U.S. House of Representatives – Alabama Consumer Rights Attorney Judson E. Crump

September 20, 2019 by Attorney Judson E Crump 3 Comments

Today the US House of Representatives passed a landmark piece of legislation aimed at helping consumers and employees get access to justice: the FAIR Act. The Forced Arbitration Injustice Repeal Act of 2019 partially repeals the Federal Arbitration Act in certain consumer and employment contracts. This is a HUGE deal. Why? Because forced arbitration has become the primary weapon that big corporations use to avoid the justice system when they’ve done wrong to their customers and employees.

The Federal Arbitration Act was passed back in the 1920s, and was initially just a procedural device for use in federal courts to help enforce agreements to arbitrate disputes. Indeed, Justice Clarence Thomas, a principled originalist, still holds that view. But unfortunately, since the 1980s, the Supreme Court’s conservative majority has steadily and grossly expanded the scope of the Federal Arbitration Act, so that nowadays pretty much every contractual dispute in America is subject to the FAA. Things like credit card agreements, cable or telephone service contracts, automobile sales, employment agreements, and just about every other contract the governs your dealings in life can now include arbitration provisions that prevent you from taking legitimate cases to real courts, and instead forces you into the secretive, private process of arbitration.

Arbitration really screws consumers for a few reasons. First, ordinary working people with claims against big business are just flat out less likely to win in arbitration, and when they do win they get less money than they typically would in real courts. Second, if you lose in arbitration, you can’t appeal, no matter how wrong the arbitrator’s decision was. And third, arbitration provisions can prohibit you from filing a class action lawsuit. This means that arbitration is often a get-out-of-jail free card for big corporations that rip off thousands of consumers. For instance, if a credit card company charges you an illegal $40 fee, what are you going to do about it? In real court, you’d file a class action and get those fees returned for yourself and the thousands or millions of other customers who’ve been similarly ripped off. But arbitration only allows you to file individual claims. And who’s going to hire a lawyer for a $40 case? You can’t! Which is exactly the point. Big business loves the free money they get from ordinary working people, so they LOVE arbitration. And, unfortunately, so do their mostly Republican allies in Congress.

Which is why today’s passage of the FAIR Act is a milestone. If it passes the Senate (which is a BIG “if,” given the fact that Republicans still control the Senate), and miraculously gets signed into law by the president, this law will be a massive win for ordinary working people. Let’s hope and pray that a few moderate Republicans in the Senate will stand up for the rights of working people and pass this bill.

Alabama Legislature Working Hard to Protect Scammers, Pyramid Schemes, and False Advertisers – Alabama Consumer Rights Lawyer Judson E. Crump

July 6, 2017 by Attorney Judson E Crump 1 Comment

Pyramid Schemes. False Advertising. Deceptive Sales Scams. This behavior has been officially protected by the Alabama Legislature.

In March of 2016, Mr. Phillip “Phil” Williams, an Alabama state Senator from Huntsville, offered a huge favor to fraudulent businesses: he proposed SB270. This was a law that amended the Alabama Deceptive Trade Practices Act. The ADTPA is Alabama’s version of what most states call a UDAP (Unfair and Deceptive Acts and Practices) statute. Every state has one. These statutes regulate things like false advertising, door-to-door or telephone sales, sweepstakes scams, pyramid schemes, bait-and-switch advertising, and outright deceit. Basically, really bad stuff that some businesses do in order to make mor emoney. The sort of stuff that everybody in their gut knows is just morally wrong.

The Alabama Deceptive Trade Practices Act is pretty weak compared to other states, because it requires a 15 day advance warning letter, it exempts insurance companies and financial institutions, and it bans class actions in state court.

But apparently it wasn’t weak enough for the big money lobby. See, federal courts follow their own rules of civil procedure, and therefore allow class actions in federal court, even where the state law may not allow that. When the Eleventh Circuit recently confirmed that principle in the case of Lisk v. Lumber One Wood Preserving. That case was a typical deceptive trade practices case. What happened was this: a man bought some “treated” wood to build a fence that was supposed to be, well, “treated.” Which means that it is supposed to be protected from rot and termites. Well, Lumber One didn’t treat the wood. And it rotted. So Mr. Lisk was left with a worthless, rotting fence. He sued for himself and for everyone else that Lumber One had ripped off. The Eleventh Circuit confirmed that yes, you can do that in federal court.

You wouldn’t think this would be a big deal, right? I mean, who wants to protect a corporation that sells people rotting wood? Senator Phil Williams and the rest of the Alabama Legislature, that’s who.

As they do for every lawsuit, big businesses all across the country threw a hissy fit. They saw signs of the apocalypse. “If we don’t protect businesses from scams that leave people with rotting fences, jobs will leave! The economy will crash!” The corporate lawyers that represent them echoed the party line:

Obviously, this is a load of crap. Lumber One didn’t face a class action because some judges in Atlanta went crazy. They faced a class action because they cheated hundreds of honest paying customers out of millions of dollars. That’s how it always is.

But even when they’ve genuinely done wrong, big businesses hate having to pay the consequences of their actions. They hate class actions because if they can shut down class actions, they can get away with millions of small frauds and ripoffs as long as they only swindle a hundred bucks or so from each customer. So when they wanted a get-out-of-jail free card, they went to Senator Phil Williams, and asked him to pass a bill they wrote.

And guess what? It passed. Nearly unanimously. The bill changes the label on the no-class-action provision in an attempt to circumvent the federal rules. In other words, they want the state court rules to apply in federal court too.

This bill was utterly unnecessary. The ADTPA was rarely used anyway, because of its preexisting limitations. Fortunately, the Alabama legislature doesn’t have power over the federal courts. So hopefully, this anti-consumer sellout of our legislature will be ingored by the federal courts.

Alabama Legislature Proposes to Help Credit Card Companies Sue their Customers – Alabama Debtor’s Rights Attorney Judson E. Crump

April 20, 2017 by Attorney Judson E Crump Leave a Comment

The Credit Industry Lobby has Succeeded in Convincing the Alabama Legislature to Make it Easier to Sue Customers.

Once again, a big business lobby has convinced some of the fools in Montgomery to propose a bill that would help the huge-money finance industry at the expense of ordinary working people. It’s a move that is pretty typical for Alabama’s Hyper-Conservative legislature, the majority of which is always ready to do the bidding of industry lobbyists.

The bill, which doesn’t yet have a name, would give credit card companies six years to sue its customers, regardless of which legal theory they are suing under.

Alabama’s current law on credit card statutes of limitations is surprisingly complex, because the statutes were written way before credit cards had been invented. Suffice it to say that some credit card cases can be brought within 6 years after the date of default, but others must be brought within three years.

The three year statute that applies to credit card lawsuits brought under the “open account” legal theory has helped thousands of Alabamians save hundreds of thousands of dollars from wage garnishments and adverse credit reporting. Is this a good thing?

Well, sure, sometimes this allows people to get away from paying debts, but despite what the credit industry would have you think, very very few collection lawsuits are filed against deadbeats. Most people want to pay their bills and try very hard to do so. But sometimes they just can’t. Maybe because they’ve been laid off, or their wife got cancer, or they got a nasty divorce that took all their assets. So escaping a wage garnishment or judgment is often the thing that saves people from being forced into bankruptcy.

So shame on State Rep. Marcel Black for proposing this law. One can only wonder what “favors” he received from the finance industry for betraying the citizens of this state.

And also, what’s wrong with requiring banks to sue within 3 years? That’s plenty of time to gather your evidence and hire a lawyer to file a lawsuit. Whenever I represent a human against a debt collector reporting false information or a car dealer who’s defrauded them, I’m stuck with a one-year or two-year statute of limitations. Do I complain? No. I just do my job and act with diligence.

There’s nothing unfair about requiring them to act almost as responsibly as I do when I sue them.

One final thought that you need to remember. Every time the credit industry pays Congress or a state legislature to pass a bill helping them at the expense of consumers, they justify it with the same argument: if you don’t pass this bill, it will increase the cost of credit and make credit less available to those who need it most. This is total bullshit. The data shows that deregulation of the banks doesn’t actually help consumers. It just increases profits. The only “credit” that is affected by most regulations is on the sketchy end of the legitimate<—->predatory spectrum. So next time you hear your lawmakers debating a handout to the finance industry, don’t think for a moment that you’ll benefit. Because you won’t.

Congress Can’t Do Anything, But They Still Find Time to Protect Big Banks – Alabama Consumer Finance Attorney Judson E. Crump

July 11, 2016 by Attorney Judson E Crump Leave a Comment

The U.S. House of Representatives Recently Passed a Bill to Help Large Financial Institutions Get Away with Ripping Off Their Customers.

It’s called the “Financial Services and General Government Appropriations Act,” and its current bill number is H.R.5485. Why does it matter? A little backstory is needed. Back in 2009, before people had forgotten just how bad the Subprime Mortgage Meltdown was, Congress passed a law called the Dodd-Frank Wall Street Reform and Consumer Protection Act. Unlike a great many laws passed by Congress (like, for instance, the comically named “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” which did nothing to either prevent bankruptcy abuse nor protect consumers), the Dodd-Frank Act really did try to reform Wall Street and protect consumers. Whether it succeeds will take some time to figure out.

One of the cornerstones of Dodd-Frank’s protections was the Consumer Financial Protection Bureau, which was authorized to regulate banks and financial institutions in certain ways. One of those authorized regulatory powers was the ability to restrict the use of forced arbitration.

As I and many others have explained before, forced arbitration sucks for a lot of reasons, because it is usually biased in favor of big corporations and if you get stuck with a bad or even a crazy decision, you cannot appeal it.

Of course, people who have done bad things generally don’t like having to pay for them, so big businesses who deal with lots of consumers love arbitration. Lots of corporations stick arbitration clauses in their massive 30 page contracts, even for things as seemingly minor as a cable subscription or cell phone purchase. Most arbitration clauses prohibit you from joining in or filing a class action lawsuit. So if a cable company overcharges 200,000 customers by $25 each, then they’ve stolen $5 Million, and they should have to pay it back, right? Most people believe so. But arbitration lets them get away with small frauds and ripoffs, because nobody is going to hire a lawyer and file a lawsuit for $25. Since the arbitration clause prevents these people from all joining together, the cable company just gets away. If a human steals $5 Million, you go to jail. If a big business steals $5,000,000, they just need to make sure they have an arbitration agreement with everyone they stole from.

This is ridiculous, so the CFPB recently issued a regulation to prohibit financial institutions from being able to do exactly that. Naturally, the banks kicked and screamed and called their pets in Congress to block the CFPB from implementing this common-sense rule. Unsurprisingly, the House of Representatives gave them exactly what they asked for. They passed this bill along party lines (Republicans mostly voted for the banks; Democrats mostly voted against them).

Hopefully, the bill will never get signed. Stay tuned.

A Microcosm of the Congressional Dysfunction Created by Industry Lobbyists – Two Letters to the CFPB

October 22, 2014 by Attorney Judson E Crump 1 Comment

Last year, the Consumer Financial Protection Bureau decided to finally get around to regulating sketchy car dealers and other non-bank arrangers of consumer financing.

Why? Because as everyone who deals with auto dealers and their financing partners knows, car dealers very often conceal important facts from the people they deal with. In this particular case, the CFPB was concerned with the way that dealers will hike up interest rates or other finance charges for borrowers who seem unsophisticated or ignorant, and lie about it. Here’s a great and common example: you go to a dealership and find a car you like. You’ve run your credit before, so you believe that you can be approved for about $18,000 of financing at 12% APR. After hours at the dealership going through paperwork and waiting while they make phone calls and work on computers, they present you with paperwork. But to your surprise, the price is $19,000 and the APR is 18%. You say “That seems a bit high!”

“That was all the bank would approve. We checked with 6 different finance companies, and that was the best deal we could find you.”

Of course, this is a lie. The truth is that they are trying to direct you to the finance company that provides the best deal for them – the one that will pay them the most for the contract. And since they pay more for contracts with higher rates relative to the creditworthiness of the buyer, they’re steering you to possibly the worst deal of the 6 companies, and they could have found you a 13% APR.

There is nothing illegal about making a profit. There is nothing wrong with not telling a buyer how much they paid for the car they’re selling you. That’s part of the deal. But there is something wrong with lying to people. When they say: “This is the best deal we could find” that should be the truth. If they want to profit, they should do it like the rest of us by buying things at a low value and selling them at a high value. So the CFPB wants to require them to be more honest.

Naturally, they don’t want to be more honest because that means they’ll be forced to – GASP! – give people fair deals! So they called their lobbyists in Washington and had them pester our Congressional representatives to try and stop the CFPB from helping out working folks. What happened?

13 House Democrats signed a letter demanding that the CFPB provide copies of all data used in determining that sketchy car dealers were lying to people about getting kickbacks from finance companies. Here is their letter:

Page 1. Even though their tone is nice, they still should be ashamed for obstructing a long-overdue effort to provide working people some relief from dishonest car dealers.

Page 2. There are 13 signatures in all.

By contrast, here are the letters from the Republicans.

Note how the CFPB's proposal to forbid dealers from concealing the amount of kickbacks they're getting from finance companies is characterized as "restricting consumer choice." This is how your party gets a reputation for hating poor people. — Page 1. Note how the CFPB’s proposal to forbid dealers from concealing the amount of kickbacks they’re getting from finance companies is characterized as “restricting consumer choice.”

Obviously, the Republican response was more pro-business and anti-consumer. No surprise there. And the way the Republican letter linguistically distorted the facts by using words like “control” and “restricting consumer choice” indicates that the letterw as probably written directly by the auto dealer lobbyists, not the Representatives themselves. That shows you just how much these 35 particular Congressmen are deeply in the pockets of the industry.

But the Democrat response is just as bad. Why? Because it shouldn’t have been written in the first place. There’s a reason only 6.5% of House Democrats signed on. Republicans make no secret of favoring businesses over people. It’s their raison d’etre.

Whose side are they on?