DannLaw launches "Scoundrels, Scams and Cheats" database to ensure public access to CFPB consumer complaint reports

On April 25, Mick Mulvaney, the head of the Consumer Financial Protection Bureau told a group of financial services lobbyists and executives that he would soon hide the Bureau's consumer complaint database from the American people and the media. They applauded.

Today that applause stopped as DannLaw founder and former Ohio Attorney General Marc Dann outlined his law firm's plan to undo Mulvaney's betrayal of the public trust. "I am pleased to announce that DannLaw has downloaded all the information in the CFPB database and uploaded it into one that will remain accessible to the public and the media once Mulvaney carries out his threat," Dann said. "Mulvaney, who is owned by the financial services industry, doesn't own the material in the CFPB's files, the public does. From this day forward, consumers will always be able to review and assess it by logging onto www.dannlaw.com/complaint-database/

Dann said his firm would update the database monthly by lodging Freedom of Information Act requests for any new complaints lodged with the Bureau. "If Mulvaney won't turn the reports over voluntarily we're prepared to take him to court, monthly if need be," Dann said. "No matter how hard he may try, we're not going to allow them to hide this information from the American people."

Dann noted that although Mulvaney has the authority to shut down the public-facing side of the database, the Bureau must, by law, continue to accept complaints. "We've placed links to the CFPB's complaint form on www.dannlaw.com and we will encourage people to continue to report abuses and illegal behavior," he said. "We're sure the director is going to bury the
complaint form on an obscure page on the Bureau's website. We want to make it easy for consumers to find and use it."

Set up in 2012, the database, which contains more than 1,000,000 complaints lodged against financial firms, has become a critically important resource for Americans who want to avoid being cheated or scammed, the media, academics, and regulators who have used it to gather evidence against companies that violate consumer protection laws. It's also become a major source of embarrassment for Equifax, Wells Fargo and other companies that have been the subject of thousands of complaints in recent years.

Dann said he's not surprised that those companies have been attempting to shut down the database since it was set up or that Mulvaney is about to answer their prayers. "Mulvaney opposed the creation of the CFPB when he was a member of Congress which also isn't surprising when you consider that he's accepted hundreds of thousands of dollars in campaign contributions from banks, credit card companies, payday lenders, and other financial services companies during his career," he said. "I'm sure they're pleased that they've gotten exactly what they paid for: a guy who puts Wall Street's interests above those of the American people at the drop of a check-laden hat."

Along with the searchable database, the firm created a "Hall of Shame" list of the companies consumers have complained about most and instructions for accessing and reviewing reports.

The Hall of Shame is posted at www.dannlaw.com/scoundrels-scams-and-cheats-hall-of-shame/

pilotonline.com
Norfolk woman set up her own debt-collection firm to help steal $300,000 from her employer
Scott Daugherty

A Norfolk woman pleaded guilty Tuesday to stealing more than $300,000 from the women’s clinic in Suffolk where she worked, according to prosecutors. . . .


Prosecutors said Gregory made $250,000 in unauthorized purchases, including concert and airline tickets, car rentals and vehicle repairs. She also received cash advances. . . .

In 2015, Gregory started a debt collection company to which she referred debts owed by some of the clinic’s patients – again without her bosses’ knowledge.

According to prosecutors, Gregory and her son ran the company, collecting nearly $50,000 owed to the clinic.
But Gregory did not use that money to satisfy the patients’ debts. Instead, she deposited it into her personal accounts, then wiped the debt off the clinic’s books.

PEOPLE ARE TAKING EQUIFAX TO SMALL CLAIMS COURT AND WINNING
 
https://www.wsbradio.com/business/personal-finance/people-are-taking-equifax-small-claims-court-and-winning/MQCH4iCylDb3AoJGVDhxCM/
 
Months after the Equifax data breach, consumers are taking the Atlanta-based company to small claims court — and winning. . . .


One of the plaintiffs, Christian Haigh, decided to document his case against the company because, like around 148 million other Americans, he was affected by the breach. Haigh, who is co-founder of litigation finance startup Legalist, wrote a couple of blog posts about the experience.


He said that although he had a business interest (his company was offering to pay the court fees for small claims litigants on a contingency basis) he was also acting as a duped consumer.


“I also filed my own lawsuit against Equifax, half expecting to have my case dismissed, and half expecting Equifax to not even show up. In fact, Equifax did appear,” he writes. Going toe to toe with Equifax’s representative in front of a judge, Haigh won $8,000.


He said that Equifax successfully filed to delay the lawsuit in an attempt to get similar cases lumped into one court session. On court day, 12 of them were supposed to present their respective cases during the one-hour session, but seven of them were no-shows.


Haigh, who admitted that he had never set foot in a courtroom before, despite having a law-oriented company, said that he came to court that day prepared to do battle. . . .
 

End of story, right? Not so fast. Equifax filed an appeal, according to a second blog post Haigh wrote. This time, they brought high-powered lawyers. Not only was the vice president of Equifax’s legal department there, but among the suits was an attorney from big-time law firm King & Spalding, known to charge clients more than $1,000 an hour. . . .

Unpaid Taxes Owed to the IRS: Consumer Debt Advice from NCLC
by Elizabeth Maresca


Advice for families in financial difficulty. (The other articles are Dealing with Medical Debt, A Reverse Mortgage Primer, and Motor Vehicle Repossessions.)

This article outlines consumer rights and options when a consumer is having difficulty paying the IRS for federal income taxes that are past due:

1.       * Why you should always file your tax return even if you are unable to pay the taxes that are due.
   
2.       * Three options to reduce or pay your tax debt over time.
3.       * Whether a spouse is obligated on taxes the other spouse owes.

The article also outlines steps the IRS takes to enforce tax debt, the implications of the taxpayer’s bankruptcy filing, and where to seek help dealing with the IRS.

You must give special consideration to your federal income tax obligations. If you can afford to pay the outstanding tax bill, you should do so in order to avoid accruing further interest and penalties.

When you owe taxes to the Internal Revenue Service (IRS), the IRS will not ignore this debt, but instead, the IRS will press collection and seek penalties and interest. Outstanding federal taxes may be collected for ten years from the date assessed—a debt to the IRS can have a long life. The IRS also has far reaching authority to collect taxes—it can place a lien on property and levy (seize) property including bank accounts, wages, Social Security, and even pension payments.


FILE THE RETURN ON TIME
EVEN IF YOU DO NOT PAY THE TAXES OWED

One of the worst things you can do if you cannot afford to pay your taxes is to not file your tax return. You must file an income tax return, in general, if you are a U.S. citizen or resident alien, and your taxable income exceeds certain amounts.
For the tax year 2018 (taxes due April 15, 2019), you have to file your return if:

• • You are single and your taxable income exceeds $12,000.
• • You are the head of a household and your taxable income exceeds $18,000.
• • You are joint filers and your taxable income exceeds $24,000.
• • You are self-employed and earn over $400.

These dollar amounts go up each year.


April 15th is the deadline for most people to file individual income tax returns and pay any taxes owed. Filing extensions are available, but this does not extend your time to pay.


If you fail to file either an extension or your tax returns by April 15, and you owe taxes, the IRS will prepare a proposed tax return, called a “substitute for return,” which shows how much the IRS thinks you owe. You can dispute that determination by responding to the letter or filing a late return.


If you file late, the IRS will assess a late-filing penalty. If you owe taxes and are late in filing by sixty days, the penalty for late-filing is 5% of the taxes owed for each month or part of a month that your return is late, with a maximum penalty of up to 25% of the taxes owed. If your return is over sixty days late, the minimum penalty is the smaller of $135 or 100% of the tax owed.


Totally separate from any fee for filing late is the late-payment penalty. If you pay late, the IRS will assess a late-payment penalty. The penalty for late-payment is only a fraction of the larger penalty for not filing a return—it starts at only one half of 1% of the tax owed for each month late, up to a maximum of 25% of the taxes owed. You will also be assessed interest on the unpaid tax and penalty.


Getting an extension to file is also not the solution it might seem to be. Although the IRS will automatically give you a six-month extension if you request it with payment of the taxes you are likely to owe, keep in mind that this is only an extension of time to file. It does not give you more time to pay the taxes you owe, and you will be charged both interest and probably a late-payment penalty during the time of the extension if you have not paid in full by April 15. As noted above, if you can’t pay the taxes due, it is a better idea to file the return, pay as much as you can, if anything, and then consider negotiating a payment option with the IRS (discussed below).


OPTIONS FOR PAYING TAX DEBTIf you cannot afford to pay your taxes, the solution is not to put the taxes on your credit card which you also will have trouble repaying. As described below, the IRS will give you a better deal than putting the tax payment on your credit card. Interest rates will be lower, there will not be a processing fee to pay, and you may even get the IRS to reduce your obligation.


When you file a return but cannot afford to pay the taxes due, you will generally have three options in dealing with the IRS:

• • Enter into a monthly installment agreement;
• • Negotiate for a smaller tax bill by seeking an “offer-in-compromise”; or
• • Request a hardship determination, called “currently not collectible” status.

All of these options require IRS approval, although the IRS allows almost every taxpayer that owes less than $50,000 to enter into an installment agreement through a streamlined process available on their website. If IRS does not grant approval for any one of the three options, you then have the right to seek an appeal or ask for a review of your case. These actions often require you to submit IRS forms, that are available at www.irs.gov.


The Installment Agreement. The IRS allows you to pay taxes you owe in monthly installments over a period of up to six years. The IRS imposes a “user fee” of $149 ($43 for low-income taxpayers) to set up an installment agreement, the fee is reduced to $31 if you set up the agreement through the IRS website and you agree to pay using direct debit from your bank account.

Penalties and interest will continue to accrue until the balance is paid in full. The interest rate will be the federal short-term rate (presently a little over 1%) plus 3%, which is a lower rate than most rates for unsecured loans and credit cards. If you have an installment plan, the penalty for late payment is only one-quarter of 1% for each month. The IRS will waive penalties if you qualify under its First Time Penalty Abatement policy, or if you have a valid reason for your late payment or late filing. Use a Form 843 to request penalty abatement.


If you owe less than $50,000 and have already filed your return, you can complete an online application at the IRS website to apply for a monthly payment plan. You can also file IRS Form 9465: Installment Agreement Request, which you can mail in or attach to your return if you haven’t filed it yet. You may also call the IRS at the phone number on your bill or notice. Be sure to ask for written confirmation of the installment plan you negotiated. The IRS charges a higher fee for requesting an installment agreement by mail (Form 9465) or by phone.


Generally, if you owe less than $25,000 and your installment agreement will fully pay the debt in six years or less, the IRS will not file lien against you. The IRS cannot execute a levy while the installment plan is in effect. (See “Steps the IRS Can Take to Force Payment,” below.)


Offer-in-Compromise. The IRS may accept payment for less than what you actually owe through its “offer-in-compromise” program. Reduced payment is permitted when the IRS determines that, under established financial guidelines, the taxpayer cannot afford to pay the full amount of taxes owed or where an exceptional circumstance exists such that collection of the tax would create an economic hardship or would be unfair and inequitable, (i.e., the assets that could be used to pay the tax debt are needed to pay for the long-term care of a seriously ill person).

There are special IRS forms you must fill out to request an “offer-in-compromise” (Form 656 and Form 433-A). You will also need to pay an application or “user” fee (presently $186) plus make a first payment of 20% of your offer amount (or the first payment of a proposed payment plan), unless your income is below a certain amount and you complete Form 656-A. Generally, an offer will only be accepted when the amount offered equals or exceeds your net equity in assets, plus your ability to make installment payments from future income.


It takes about six to twelve months for the IRS to review an offer-in-compromise. During that period, you will not be expected to make any payments on your tax debt. However, interest and penalties will continue to add up, so if your offer-in-compromise is rejected, you tax bill will grow during the time the IRS has your offer-in-compromise under review.


Non-Collectible Status. You may be eligible for a temporary hardship determination from the IRS, called “currently not collectible” (CNC) status. The IRS will only grant you this status if you do not have any assets you could use to pay your tax debt and you do not have any income left after “allowable expenses.”

Allowable expense are listed on the IRS website (use the search box to find, “Collection Financial Standards”) and are used by the IRS to determine allowable monthly living expenses. If your monthly income is less than the allowable living expenses, you will be eligible for the non-collectible status and the IRS will put your account on hold.


CNC status is not permanent, and does not mean the tax debt is forgiven or reduced. This status can change if your financial circumstances improve, if you file another return with a balance due, or if you do not file a tax return when you are required to do so. The IRS will monitor your tax returns and remove the hardship status if your returns suggest a significant financial improvement. Also, interest and penalties will continue to add up during this time.


To apply for CNC status, you should call the IRS at 800-829-7650 and specifically ask to be placed into “currently non-collectible status.” If you do not ask for the status, the agent will generally ask you to set up a payment plan. When you ask for non-collectible status, the agent may send a Form 433-F: Collection Information Statement, for you to fill out, but in most cases, the agent will simply ask you questions in order to gather the relevant information to make the “currently not collectible” determination during the phone call.


If the IRS grants CNC status, it may file a lien with the county recorder’s office (or similar agency) if you owe more than $10,000 even if you do not own any property. Generally, the lien will not appear on your credit report.


SPOUSAL DEFENSES

In certain limited cases, your responsibility to pay a tax may be cancelled when the tax is owed entirely by your spouse or ex-spouse. This cancellation may be available when your spouse or ex-spouse was solely responsible for failure to pay the taxes, the taxes are entirely attributable to your spouse’s separate business, or if you were the victim of domestic abuse. This is true even if you filed a joint return. If you believe you are entitled to the IRS’s “innocent spouse relief,” you can file a Form 8857, but help from a tax professional is recommended. Resources for getting help are listed at the end of this article.


STEPS THE IRS CAN TAKE TO FORCE PAYMENT

If you do not set up a payment plan, negotiate an offer-of-compromise, or secure “currently not collectible status,” the IRS can force payment. Before the IRS actually forces payment, it will generally send you a series of threatening letters, for instance a Notice of Tax Due and Demand for Payment or Final Notice of Intent to Levy.


These notices inform you that the IRS intends to seize or “levy” your property. The IRS can take any or all of your property, such as bank accounts, paychecks, and even homes, with the exception of certain exempt types of income and possessions.


Part of your wages are protected from being seized by the IRS—they are exempt from levy. A single filer can protect $230 per week, while a married couple filing jointly can protect $461.50 a week, meaning all of your salary will be seized except for the protected amount. Also exempt from levy are unemployment benefits, workers’ compensation benefits, certain public assistance benefits, income needed to pay court-ordered child support, and certain pension benefits. Other protected property includes certain amounts of clothing, furniture, personal effects, and job-related tools. A state homestead exemption will not protect your home from an IRS tax lien or seizure. The IRS will not know about exemptions or defenses unless you or your advocate informs the IRS.


The IRS can also recover past-due taxes by seizing certain federal benefits and other payments, including Social Security payments (but not Supplemental Security Income payments). The IRS can levy 15% of your entire Social Security benefit. Unlike other forms of federal government seizures of benefit payments, the first $750 of your monthly income is not protected. In some cases, the IRS will levy even more than 15% of Social Security benefits.


Generally, the IRS will exempt low-income taxpayers from a levy on Social Security benefits. If your Social Security benefits are being seized, you should call the IRS at 800-829-7650 and specifically ask for them to remove the levy and place you in “currently not collectible” status or ask for a payment plan in a lower amount than the levy. Generally, the IRS will remove a Social Security levy if you are low-income. Resources for getting help are listed in at the end of this article.


When you receive a notice that your property is being levied or a lien is being placed on it, you can request a review of your case called a “Collection Due Process” hearing on Form 12153. You have thirty days from the date of the notice to request a hearing. The hearing request will result in a suspension of collection activities, including any levy, during the appeals process. During the hearing, you can request one of the payment options discussed earlier in this article—an installment agreement, an offer-in-compromise, or non-collectible status. In certain situations, you can dispute that you owe the tax.


Unless most or all of your assets and income are exempt from levy, it makes sense to negotiate for one of the three options for paying your tax debt to avoid seizure of personal property and income. Make sure any agreement is in writing. A good source for information about taxes is the IRS website at www.irs.gov.


EFFECT OF BANKRUPTCY ON YOUR TAX DEBT

Bankruptcy is not as effective a remedy when dealing with taxes as with other debts. In general, only old taxes debts can be discharged in a chapter 7 bankruptcy, for example, where the debt stems from a timely filed return that is more than three years old. Existing tax liens are likely to remain on your property even after a bankruptcy. In a chapter 13 bankruptcy, the full amount of the taxes owed can be paid in installments over a three-year to five-year period.


SEEKING HELP

You may be able to get help with your tax problems from a Low-Income Taxpayer Clinic. These are legal clinics based at law schools and legal services offices that help low-income taxpayers who have disputes with the IRS. Clinic locations are listed in IRS Publication 4134: Low Income Taxpayer Clinic List, and can be searched online at www.irs.gov/advocate/low-income-taxpayer-clinics/low-income-taxpayer-clinics-map. Another option may be your local legal services office, which can be located using http://lsc.gov/find-legal-aid.


In some cases, you can get assistance from the IRS Taxpayer Advocate Service, an independent organization within the IRS that helps taxpayers who have not been able to resolve tax problems through normal channels. You should fill out Form 911 or call 1-877-777-4778 to request Taxpayer Advocate Service assistance. IRS forms can be found at www.irs.gov.

Motor Vehicle Repossessions: Consumer Debt Advice from NCLC
 by Carolyn Carter, National Consumer Law Center (NCLC)

This is the third in a series of articles from NCLC that provide advice for families in financial difficulty.

The focus of this article is on motor vehicle repossession including

* limits on self-help repossessions
* ten strategies to prevent repossessions
* six steps to take after your car is repossessed, and
* advice on responding to the creditor’s demand for additional payment even after the repossession.

OVERVIEW

When buying a car on credit, you almost always must put up the car as collateral for the loan. Sometimes consumers also use their cars as collateral for an unrelated small loan. Most of these are high-cost auto title or “auto pawn” loans, which are legal in some states but illegal in others.


If your car is collateral for a loan and you get behind on your payments or violate other loan terms, you risk the immediate repossession of your car. Miss one or two payments and your car may be gone.


A repossession agent may break into your car and drive or tow it away. The process is called “self-help” because the creditor is not required to go to court to get permission from a judge to repossess your car. In most states, the creditor does not even have to notify you that a repossession is about to take place.


There are important exceptions to a creditor’s right to use “self-help” repossession:

• • The creditor must have taken the car as collateral or the car must have been leased to you. For example, if you do not pay a medical debt or a credit card debt, the medical provider or card issuer cannot repossess your car.
• • In some states, the creditor must first give you notice of the right to catch up on delinquent payments. (See Curing a Default below.)
• • A self-help repossession cannot breach the peace.
• • Self-help repossession is generally illegal on certain American Indian reservations. In Louisiana, self-help repossession is illegal unless the creditor is a licensed financial institution or bank that has a state or U.S. charter and the repossession agent has a state license. In Wisconsin, the consumer can object to self-help repossession if the consumer does so within 15 days of receiving notice of a pending repossession. Self-help repossession is legal in Maryland only if the credit agreement allows it.
• • A creditor cannot use self-help to repossess a car owned by active duty military personnel if the debt was incurred before the individual entered active duty. Children, spouses, and other dependents of active duty military personnel are similarly protected, but only if they apply to a court for an order prohibiting repossession.

After the creditor repossesses your car, the creditor will then sell it, typically for much less than it is worth. If so, you may find yourself being sued for the amount of money that the creditor claims remains to be paid on the loan after deducting the proceeds of the sale. This can be thousands of dollars.


STRATEGIES TO PREVENT REPOSSESSION


Keeping Current on Car Payments. Do not pay credit card debts, medical bills, or other low-priority debts ahead of car payments. If you skip payments on low-priority debts, you will not be in immediate danger of losing your property. Skip one or two car payments and you risk losing your car. If you find it necessary to miss payments on low-priority debts, try to get caught up on your back-payments as soon as possible.


Keep Your Car’s Damage Insurance Current. If your damage insurance lapses, the creditor is likely to add replacement insurance to your car payments that is much more expensive and offers much less protection than insurance you could purchase yourself. You will have even more trouble keeping up your now higher-cost car payments.


Consider Cancelling Other Insurance and Add-ons. Often, as part of a car sale, the dealer has sold you add-on products—a service contract, credit life insurance, credit accident and health (or disability) insurance, credit unemployment insurance, GAP insurance, theft protection, tire protection, key fob replacement, or an auto club membership. These add-ons are often overpriced or even worth very little. Find out whether you can cancel these add-ons and get a rebate of the unused part of their cost. The rebate may help you make one or more of your payments on the car and may make future payments lower.


Negotiate with the Creditor. Some creditors may be willing to allow you to skip a payment or make a payment late. If you get an agreement, confirm it in writing. Make sure the agreement is one that you can comply with. For example, if the creditor allows you to make a payment ten days late, make sure before you agree to this that you really can make the payment then.


Curing a Default. The following states give consumers a right to cure—a second chance to make up late car payments before repossession: California, Colorado, Connecticut, the District of Columbia, Iowa, Kansas, Maine, Massachusetts, Missouri, Nebraska, New Hampshire, Puerto Rico, Rhode Island, South Carolina, South Dakota, Virginia, West Virginia, and Wisconsin. Pay attention to the notice you will get telling you how many days you have to pay the amount past due to avoid repossession. Rights to cure auto leases are available in Connecticut, the District of Columbia, Illinois, Iowa, Kansas, Maine, New Hampshire, New Jersey, New York, Rhode Island, West Virginia, and Wisconsin.


Sell the Car. If you cannot afford your car loan payments, insurance, and maintenance costs, you are generally better off selling the car than having it repossessed. Selling the car yourself before it is repossessed will bring in a much higher price than a repossession sale would, you will not have to pay the creditor for the creditor’s repossession, storage, and sales expenses, and you can obtain a larger rebate on any service contract, automobile insurance, or credit insurance that you cancel along with the sale. Your credit rating will also be higher than if the car is repossessed.

Because the creditor has a lien on your car, you can only sell it with clear title if you use the sale proceeds to pay the creditor the full outstanding balance. If you cannot sell the car for as much as is owed on the loan, you will have to pay the creditor the difference, unless you convince the creditor to take less.

Avoid anyone who offers to “broker” a sale or lease of your car to another consumer. In many states car brokerage is illegal. A scammer may take money from both you and the new “purchaser,” but not complete the paperwork for a real transfer in ownership or forward payments to your lessor or creditor. Instead, you will lose the use of your car but still owe the creditor or lessor the full amount.


Return the Car to the Creditor, but Make Sure You Get a Fair Deal. Done incorrectly, voluntarily turning the car in to the creditor will not help you much. You will still owe the creditor if the repossession sales proceeds are less than what you owe and you will have waived your claims and defenses. Voluntarily turning the car in might make sense if you obtain a written agreement from the creditor that you do not owe anything else on the loan. Also try to have the creditor state in the agreement that it will not report the default to a credit reporting bureau.

The situation is similar when you turn in a leased car. It is a common mistake to believe that you will have no further obligation after you turn the car in early. You will have no further obligation (except excess mileage or unusual wear) if you turn the car in at the scheduled termination of the lease. Your liability at early termination may be thousands of dollars. Before turning in a leased car early, negotiate to reduce or eliminate your early termination liability. Make sure to get this agreement in writing.


Thwarting a Self-Help Repossession. Self-help repossession can take place on the street or even in your driveway. But a repossessor cannot legally break into a locked garage. Repossessors also cannot seize a car they cannot find, but most states make it a criminal offense to conceal collateral (such as your car) or to move it out of state. It is also becoming more and more difficult to hide a car because of technological advancements in tracking cars.

Most courts say that if you or a family member is present during the repossession and objects, the repossession should not continue. But your objection should not involve force. Politely and firmly tell the repossessor not to take the car. Do not be swayed by any legal advice offered by the repossessor.

Never resort to force. Never meet force with force. If the repossessor uses force or threats, or otherwise breaches the peace, call the police. Do not take matters into your own hands. After the fact, consult an attorney. There are significant legal remedies available to challenge an illegal repossession.

Never resist government officials in the performance of their duties, but make sure the person is not just impersonating a government official. Government officials should only operate pursuant to written court orders and should not assist self-help repossessions. Ask for the official’s identity and the reason why the official is there. Inspect any documents the official waives around claiming to be a court order.

When you are delinquent on a car loan, it is risky to bring your car in for repairs to the dealer or anyone else the creditor would know. Do not drive the car to the creditor’s place of business to discuss a work-out agreement. You may have to walk home if you fail to reach a satisfactory arrangement.


File for Bankruptcy Protection. Once you file for either a chapter 7 or 13 bankruptcy, no one can take any action against your property, including repossessors. Although a lender may later ask the bankruptcy court for permission to take the car, there can be no repossession before obtaining that permission. A chapter 13 bankruptcy also can help you keep the car in the long run because you can spread out your payments (both past-due and new payments) over three to five years. Keeping the car will be more difficult if you file under chapter 7, because at some point you will have to pay the creditor either the lesser of the car’s value or the total amount that remains owed on the car loan.


Minimize the Loss of Personal Property Inside the Car. Property left in a car has a way of disappearing after the car is seized. If you anticipate a repossession, remove your personal property such as tools, GPS devices, media players, clothes, and sporting equipment from your car. Remove any important records from the glove compartment. There are some items, however, such as children’s car seats and a spare tire, that should be left in the car while you use it. Make a list of these items and photograph them so that you will be in a better position to claim them if the car is repossessed.


WHAT TO DO AFTER YOUR CAR IS REPOSSESSED

Get Back Personal Property Left in the Car. Creditors cannot keep your personal property that was left in your car after it has been repossessed. The lender can only keep the car itself. As soon as possible, demand both by phone and in writing any property left in the car specifying each item. Make the request quickly before the property disappears.


In Some States You Can Reinstate the Contract and Get the Car Back. The following states allow a consumer to reinstate the contract after repossession in at least some circumstances: California, Connecticut, the District of Columbia, Illinois, Maryland, Mississippi, New York, Ohio, Rhode Island (although the phrasing of the law is not completely clear), and Wisconsin. Reinstating the contract allows you to recover the repossessed car by paying only the back-due payments, not the full amount of the debt. You may also have to pay the costs of the repossession and any storage charges, plus possibly one or two payments in advance. You must act quickly. In most states where it is allowed, you have only a few weeks to reinstate after repossession.


You Can Redeem the Car. In every state, after a repossession, you can redeem the car. This means that you can get the car back by paying the full remaining amount due plus expenses (redemption does not apply to leases). The creditor must notify you of the date of the car’s sale or a date after which the car will be sold and the creditor must include a telephone number to call to find out how much you have to pay to redeem the car. You can redeem the car up until the very moment before the car is sold.

If you are having trouble keeping up with monthly payments, you are unlikely to be able to pay off the whole debt at once. If a car is important to you and worth more than the debt, consider borrowing from friends, relatives, or elsewhere. Don’t mortgage your house to get your car back because defaulting on that loan may result in your losing your home.


Try to Negotiate with the Creditor. If your car has just been repossessed, you might be able to negotiate to get the car back. You are in a particularly strong position if you have significant claims or defenses relating to the car, its credit terms, or its repossession. If a car has minimal resale value, the creditor should also prefer a workout agreement to a worthless asset.


Get the Car Back by Filing Bankruptcy. You can get your car back by filing bankruptcy, even after it has been repossessed, as long as you do so before the creditor sells it. Once you get the car back, if you want to keep it for the long term, you must make payment arrangements, which as explained below, will vary depending on whether you file a chapter 7 or 13 bankruptcy.

In a chapter 7 bankruptcy, you must pay the creditor the lesser of the full remaining balance of the debt or the car’s value. Some creditors let you make this payment in installments, but other creditors will require you to pay the full amount in one lump sum.

In a chapter 13 bankruptcy, you have several ways of keeping the car. Probably the best one is to set up a plan to pay off the car loan in monthly installments over a period as long as five years. The interest rate charged in a chapter 13 plan can, in some instances, be lower than what you are paying on the car loan. You may even reduce the amount owed to the current value of the car, if the car’s value is less than the amount you owe, particularly if you bought the car over 910 days before your bankruptcy filing.


When the Repossession Was Wrongful. You can file a lawsuit to get the car back and receive damages if the car was taken improperly, but this will require the help of an attorney.


CREDITORS’ COLLECTION EFFORTS AFTER THE REPOSSESSION SALE—THE DEFICIENCY ACTION

After repossession, the creditor will sell your car and apply the sale price (after deducting all repossession and sale expenses) against the amount you owe. If the net sales proceeds are more than the amount you owe, the creditor must pay you the “surplus.” Far more commonly, however, the net sale proceeds will be less than the amount you owe. When the net sale proceeds is less than the amount you owe, it is called a “deficiency.” If there is a remaining amount due, creditors will then come after you for the deficiency. When a lessor repossesses a leased vehicle, the result is the same. The car is sold and the lessor seeks a further amount called “an early termination charge.”


Once your car has been repossessed, your deficiency obligation is no longer backed up by any collateral, and should be treated as a low priority debt just like a hospital bill or a credit card debt. You should not pay it ahead of more pressing obligations, such as rent or utility bills. With a repossession already indicated on your credit record, an unpaid deficiency amount will not do much more to hurt your credit score.


Many defenses may be available to you if a creditor attempts to collect this deficiency through a lawsuit. The flip side of creditors being able to seize and sell your car without court supervision is that they have to strictly follow certain rules, and they often do not. Your legal rights are strong where the creditor or lessor trips up and you may be able to eliminate the amount demanded, or even end up with a positive recovery for yourself. But you will need help from a lawyer to effectively defend a lawsuit seeking a deficiency or early termination charge. Here are some defenses to look for (see NCLC’s Repossessions for more detail):

• 1. Claims concerning the car or the credit terms. Was the car a lemon, or did the dealer misrepresent the car’s quality or the credit terms?


• 2. Is the car collateral on the loan? Sometimes the creditor trips up on a technical requirement to make the car collateral for the debt. Does one spouse own the car and the other spouse is obligated on the loan? Is the car collateral for an earlier loan but not listed as collateral in a refinancing of the original car loan? If the creditor has not taken the car as collateral, it cannot repossess the car, even if you defaulted on a loan used to purchase the car.


• 3. Were you in “default” when the car was seized? If a creditor routinely accepts your late payments, the creditor may be prohibited from seizing the car just because a payment is late. It may have to notify you first that it will no longer accept late payments. You may not be in default if you gave the creditor notice you were withholding payments because the car was a lemon. Did the creditor repossess before your right to cure period had expired?


• 4. Did the car’s repossession breach the peace? When a seizure is wrongful, the creditor generally should not keep the car or collect a deficiency. The creditor may owe you money instead.


• 5. Improper repossession sale or miscalculation of the deficiency. If the creditor does not sell your car, but instead keeps it, the creditor cannot seek a deficiency. If the creditor sells the car, it must strictly follow correct procedures as to notices and the sale. Failure to follow the procedures exactly often can eliminate the deficiency.You must be notified that the creditor will sell your car, describing the car, the nature of the sale, the time and place of a public auction or the date after which the car will be sold privately, and other important information. The sale cannot be too rushed and it cannot be overly delayed. Every aspect of the sale, including the advertising, the manner, the time, the place, and the terms must be “commercially reasonable.” Look out for low-price sales to insiders.
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  Check to see if the creditor correctly calculated the amount of its claimed deficiency. If the creditor asks you to pay a deficiency after the car has been sold, in most states the creditor must send you a summary of its calculations, along with an address or phone number where you can get additional information.


• 6. Auto leases. Your defenses will be different if the car you leased is repossessed. The amount the creditor (also known as “the lessor”) claims you owe must follow the complex formula stated in the lease and must also be reasonable. The terms of the lease also must be properly disclosed and not misrepresented.