The Basics Between a Credit Union and a Bank

It seems that at least half of my clients use credit unions without knowing how a credit union differs from a bank.  Here is a very brief summary of the differences:

CREDIT UNIONS

BANKS

-       not for profit -       has “members” -       there is some sort of mutual association between its “members”  (examples include teachers, farmers, people living in a particular small town, etc.) -       a member draws on his or her “share” in the union -       a member issues a “share draft” to assign funds to a third party -       the union is not FDIC insured -       the union is not taxed -       usually simpler banking principles and functions

-       for profit -       has “customers” -       no relationship needed between the customers (i.e. anyone can obtain an account) -       customer draws on his or her ”account” with the bank -       customer issues a “check” to assign funds to a third party -       the bank is FDIC insured -       the bank is taxed by state and federal governments -       the bank usually has very complex functions it can achieve

For a discussion of the feud between credit unions and banks, I invite you to read Kathryn Reed Edge’s article “Feud is Alive and Raw for Banks and Credit Unions” in the Tennessee Bar Journal’s April 2010 Edition, pages 29-30.

THE EFFECTS OF A CONVICTION

Sometimes when you are charged with a crime, it seems like the best solution is to accept the plea bargain the prosecutor is offering.  Before you do that, consider these consequences of a conviction:

-       Some occupations preclude employment if you have certain convictions or have licensing laws that allow the state to deny employment for criminal convictions.  Examples include

• Dealer of dogs and cats
• Mortgage, real estate, insurance agents
• Court clerk
• Lottery retailer
• Pawn broker
• Doctor
• Attorney
• Nurse
• Teacher
• Funeral Director
• Contractor
• Locksmith
• Bill Collector
• Geologist
• Bus Driver of Children
• Athlete Agent
• Counselor or Therapist
• Police Officer

-       Anyone convicted of a felony is ineligible to serve in the armed forces without an authorized exception issued by the Secretary of the armed services branch.

-       A State employee convicted of a felony that was related to the employment or official capacity is not entitled to receive retirement benefits from the State.

-       A landlord may evict a tenant after the tenant has been charged or convicted of an offense that could present a danger to the health, safety, or welfare of other tenants.

-       If convicted of a felony, a person is automatically ineligible to vote, hold public office, or serve on a jury.  It is possible to have these rights reinstated.

-       A convicted felon may not be able to own a handgun.

-       A convicted felon may not be able to change his or her name.  This is definitely the case for anyone listed on a sexual offender registry.

-       Depending on the type of conviction, the felon may have to register as a sexual offender.  This carries various limitations based on the crime that will limit where a felon can work, live, etc.

-       Depending on the crime, some crimes require lifetime supervision.

-       State and federal drug offenders may be ineligible for federal grants, licenses, contract, and other federal benefits.

-       Passports will be revoked for felons convicted of drug offenses.

-       Future sentences will be enhanced based off of the previous conviction.

RULE OF THUMB:  Be very careful and think through all of the consequences before accepting a plea agreement.

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WHAT’S AN EMPLOYER TO DO WITH A GARNISHMENT ORDER?

Garnishments are statutory remedies granted to a creditor through a judgment to collect on a debt.  When an employer receives a garnishment order, the employer has three options:

(1)  answer the garnishment without an objection;

(2)  answer the garnishment with an objection; or

(3)  do not answer.

Since an employer is required to answer a garnishment within 10 days of receiving it, it is generally best if the employer chooses either options (1) or (2).  Option (1) would require the employer to calculate the percentage of the employee’s wages that will be sent to the court to compensate the creditor, and the employer will inform the court of that amount.  Option (2) allows for the employer to raise an objection to paying any amount to the court, and the reason might be that the employer is already garnishing 25% of the employee’s wages for other creditors or that the debtor is no longer an employee.

If the employer chooses to do nothing, then once the ten days have passed, the employer will be given a Scire facias, which is essentially a second chance that permits the employer to answer before a conditional judgment against the employer becomes final.  This is the important part:  if an employer does not answer the garnishment within the ten days, the court can issue a conditional judgment against the employer for the amount of money due to the creditor.  If the employer does not answer within the time limit defined in the scire facias, then the conditional judgment granted by the court will become final, and the employer becomes responsible for paying the debt.  In addition, at that point, there is no time for objections to be lodged, rather, the employer can only appeal the judgment.

RULE OF THUMB:  If you are an employer, answer the garnishment within ten days.

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Credit counseling and Debtor Education

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In 2005, Congress began requiring debtors seeking bankruptcy relief to complete a credit counseling course in order to file for bankruptcy.  In addition, a debtor must complete a debtor education class on financial management before discharge.  These classes can be completed online, in person, or over the telephone.  I like to give my clients the complete listing of the approved agencies in Middle Tennessee to let them find a the most cost-effective one.  Some courses are priced at $50, while others are only $11.  It is worth the time to shop around online for the best deal.

Positive Review for Gordon Law Group’s Bankruptcy Practice!

This review was recently posted on the google maps website by one of my clients:

 

Smooth sailing ‎‎  By Kristine – Jul 9, 2010 by Kris and Nick Our experience with Gordon Law Group was great. From the first meeting with Robin we knew we would be looked after and be shown honesty and respect with regards to our case. We were represented by Christina who consistently worked with us on getting the appropriate documentation together to avoid problems during our 341 hearing. As with any bankruptcy, there were points of uncertainty but we have to hand it to this group. Christina, Robin, and John were calm and collected the entire time and helped us move smoothly through an otherwise stressful process. The lawyers at Gordon law group know how to get the job done. We are grateful for their hard work. Thanks guys.‎

 

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New Bankruptcy Exemptions in Tennessee

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Tennessee has increased its personal asset exemption limit from $4,000 (which was written into the laws in 1980) to $10,000.  The new law was passed April 5, 2010, and it went into effect July 1, 2010.  This law will help debtors in Tennessee keep a greater amount of possessions, which will help reduce the chance of them becoming burdens of the State.  See TCA 26-2-103 (http://www.michie.com/tennessee/lpext.dll?f=templates&fn=main-h.htm&cp=) (not yet updated on the official TCA website as of July 5, 2010) for reference.

Help! I Don’t Want the Trustee to Take my Car!

 

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Many of my debtors come to me, and they are panicked about the thought of the trustee in a bankruptcy taking their belongings.  Tennessee does not have expansive exemptions, so there is some concern, but, as always, it depends on the situation.  Generally speaking, a single debtor is permitted $10,000 worth of assets (this limit is new as of July 1, 2010).  This includes the money in your bank accounts, your furniture, and the equity in your car, among other things.  Your 401(k), IRA, and clothing come under separate exemption categories and are not included in the $10,000.  What the exemption limit means is that, as a debtor, if your assets are worth more than $10,000, the trustee can conceivably come to your house and take your property that exceeds the $10,000 limit.  This is a scary thought.  Remember though, that actions involving a court do not happen willy-nilly.  Rather, the trustee and your attorney will be having discussions about the value of your assets, and you will have more than adequate warning if the trustee needs to come and value your assets to potentially seize them.

Now, some people ask me then, “well, can I just give my car to my mom?”  No.  You will need to account for any such gifts of assets on your statement of financial affairs.  If you sell your assets for a reasonable price and use the money for living expenses, the trustee generally does not take issue with such actions.  However, it is generally a bad idea to transfer ownership for a nominal or no price to a relative immediately before filing bankruptcy.  The trustee could cite you with committing bankruptcy fraud, and then you would not be granted a discharge and could face stiffer consequences involving the federal courts.  Being honest is always the best policy.

Remember that if you have any concerns, please speak with your attorney, who can help you value your assets and explain how the exemptions will apply to your case.

What Do I Need To Pay If I’m Filing Bankruptcy?

 

When new clients meet with me for the first time, I often advise them that  as soon as they know they are going to be filing for bankruptcy within the next 90 days, they should stop paying any creditors.  The main reason for this is so any of those payments will not be treated as a preferential payment, and the trustee will not have to ask for that money to be given to the bankruptcy estate.  Another reason I advise this include that I want to make sure my client is as stable as possible going into the bankruptcy.  One of the few items I stress for my clients to pay as the bills become due are utilities and secured debts that involve assets the client wants to keep (such as a house or a car).  The utility companies do not negotiate — either you pay them and get their services or you do not pay them and do not receive their services.  A lawyer can do very little to no negotiating with a utility company.  In addition, if a client is behind on utilities going into the bankruptcy, the utility company can request the debtor submit a security deposit to ensure payment of services.  As for the secured debts, a creditor generally will not agree to the debtor reaffirming (read:  keeping) the debt and the asset unless the debtor has proven himself to be worthy by staying current.  So, in the end, pay your utlities and the bills for the things you want to keep!

Will You Put Anyone In a Bankruptcy?

 

Will You Put Anyone in a Bankruptcy?

 

No.  Contrary to how some attorneys practice, I will not put just anyone in a bankruptcy, and I am judicious about who I accept as clients.  When I am considering whether to help a client file for bankruptcy, I consider the following factors:

• Whether the debtor is financially stable if the debt is removed.  To put this another way, if the debtor doesn’t have the bills hanging around his or her neck, can he or she afford the cost of living.  My rationale is that if the debtor cannot afford the cost of living, I am not using the protection of bankruptcy to the fullest extent.  I want to time the bankruptcy so I maximize the amount of debt owed, and I want to really be able to give the debtor a fresh start.  In addition, if the debtor is still living on credit at the time of filing and afterwards, then the debtor could be cited for bankruptcy fraud (incurring debt while planning to file for bankruptcy), and the debtor will be barred from filing for bankruptcy for the next seven years. 
• Whether the debtor has an income that fluctuates wildly.
• Whether the debtor is serious enough to go through with the bankruptcy proceedings to the point of reaching a discharge.
• Whether the debtor has stopped living off of credit.
• Whether the debtor is truthful about his or her assets to me.
• The amount of debt owed to the amount of creditors versus the debtor’s income.
• The amount of debt that is non-dischargeable (such as tax debt, student loans, and domestic support obligations).

When considering to hire an attorney to help you file for bankruptcy, it’s a good idea to make sure the attorney is looking out for your best interest.  I invite you to come into the Gordon Law Group and meet with me to discuss your debt-relief options.

How do I pay for a bankruptcy?

A lot of my bankruptcy clients do not have much money.  Generally, that is a given, and it is the reason they are needing to file for bankruptcy.  However, many of them do not know how they can afford a bankruptcy, and so instead of seeing a lawyer and trying to get some relief, they continue to live in a perpetual state of fear from their bill collectors.  If you know that you are going to be filing for bankruptcy, it is advisable to stop paying credit cards and other similar bills.  It is important to stay current on your house, car, insurance, and utility bills, but the other ones you can let go.  Why?  Isn’t this counter-intuitive?  The answer has a couple of dimensions:  (1)  you need the money to live on (i.e.  eat, keep a roof over your head, get to work); (2) the payments to creditors are usually so small that they only pay a small percentage of the interest; (3) a trustee can pull back payments made to creditors within 90 days of filing for bankruptcy as preferential payments, so the creditor could end up without a payment anyway; (4) you will need the money to pay the bankruptcy attorney.  A wise Chapter 7 bankruptcy attorney knows to get paid in full before filing a bankruptcy case.  This is because otherwise the debt will be discharged in the bankruptcy, and the attorney will not be able to collect on it afterwards.  In addition, the automatic stay will bar any attempts during the bankruptcy of the attorney to collect on the debt.  Always be wary of an attorney who says he or she will let a client pay later — they may not know the law as well as they should.

On a related note, it is very important for a debtor who wants to keep her house and car to be current on those payments.  A secured creditor has no reason to enter into a reaffirmation agreement with the debtor to continue the debt through the bankruptcy for collateral such as a house or car unless the debtor has proven to be trustworthy and reliable with payments.  It is also important to stay current on the insurance for a house and car because that is often a requirement by a creditor when extending credit.  If a debtor lets the insurance lapse, a creditor may have the right to foreclose or repossess on the basis of breach of contract.  Finally, it is important to keep your utilities current because otherwise they will be shut off, and they will only be turned on again when you are current.

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