Category Archives: Debt Settlement

Sharpen your pencils

I’ll be the first to admit, math is not my strong suit. Despite having a Tiger Mom and having taken years of Kumon I still have to reach for the calculator whenever I do math.

If you are mathematically challenged like me, you probably have no idea what your monthly payment is on a $10,000 credit card debt repaid over 5 year at 10% interest. How about 20%? 30%?

You may be surprised to learn that you would repay almost DOUBLE the amount you borrowed over 5 years at 30% interest.

Here’s the break down:
Loan amount: $10,000
Repayment: 5 years

Interest rate/ Monthly payment/ Total amount repaid
10% $212.47 $12,748.23
20% $264.94 $15,896.33
30% $323.53 $19,412.04

To put these numbers into perspective, if you were to repay the same $323.53 at 5% interest, you would have repaid the ENTIRE loan after 34 months (that’s 2 years and 10 months). In another words, you would be done with debt 2 years and 2 months sooner just by a reduction in the interest rate.

This is the reason why credit card debt is so to toxic. You end up paying 100%+ of the amount borrowed on interest alone.

One of the most common mistakes I see clients make is making the monthly minimum payments on their credit cards. Making the monthly minimum payment makes almost NO DIFFERENCE on the principal amount of the loan. For example, if you were to make only the monthly minimum payment on the $10,000 credit card loan, you would repay $24,261.14 over 365 months. (That’s slightly over 30 years!) The starting monthly minimum payment? $350.

So, sharpen your pencil, gather all of your bills and spend some quality time with your calculator. For those of you who are mathematically challenged like I am – have no fear. There are hundreds of online calculators that will do all the math for you. Here’s one of my favorites from Bankrate.com

Image credit: xsphotos

Top 5 things not to do if you’ve been sued by a creditor

If you’ve been sued for unpaid debt, it’s easy to go into denial mode and ignore it. If you’ve been reading my blog, you know that denial is never a good solution. However, there are at least 5 actions you should not take if you’ve been sued by a creditor.

  1. Don’t ignore. I meet with so many clients who will say things like, “well, according to google, I can just ignore it” or “the summons was just left on my doorstep so I thought it was safe to ignore because I was not properly served.” We’ll leave my thoughts on “googling” your problems alone for now. However, I will say that there is lots of false information on Google! Please do yourself a favor and call an attorney.

  2. Don’t call the creditor’s attorney. I know. You’re probably thinking, if I can just explain my situation to the creditor’s attorney, he will understand and drop the case. WRONG! Creditors are after one thing - money. And believe me when I say this, they will take the clothes off your back or food out of your child’s hands given a chance. They are in it to make money. They don’t care if you’ve never missed a payment for the last 5 years, or that you’ve lost your job. They will do everything to get money out of you.

  3. Don’t answer the complaint without assistance of an attorney. This is another common mistake I see all the time. Clients file their own answer to the complaint. First, you may be making admissions inadvertently which may be used against you. Like on Law & Order - “anything you say can and will be used against you.” I met with a client recently who told me he admitted to owing the debt in the answer but went on to plead his case to the judge. I know it may seem heartless, but the judge, nor the creditor or its attorney cares what kind of dire financial situation you’re in.

  4. Don’t think you can show up and “pitch” your story to the judge. Again, related to #2 and #3. Until there is a trial, which won’t happen until discovery has been concluded, the judge is not going to hear your story.

  5. Do not make payments. You probably mean well and might think that if you make a payment, you can stall the lawsuit. Unless you pay the demand amount in full, the lawsuit will most likely continue. Paying them “good faith” or “token” payment of $100 just isn’t going to do you any good, so save your money and use it towards your attorney instead.

Have you been sued by Mann Bracken?

If you have been sued by Mann Bracken or any other law firm representing creditors, it is important that you not ignore it. One thing you may not realize is that often times, the creditor that is bringing the law suit are third party collection companies (not the original creditor) and they may not be able to prove the debt. Remember, the burden of proof is on them. They must prove that you did in fact incur the debt they are suing you for.

Assuming you do nothing and ignore the law suit, they will get a default judgement. This means that they can garnish your wages, or put a a lien on your property. They will not only get the amount they sued for, but generally costs, such as cost to bring the law suit, as well as attorney fees.

Law suits are always an expensive proposition for all parties involved. Even at the end of the day, the plaintiff is unable to prove the debt, you’ll have to front the expense of hiring an attorney. Depending on your financial circumstances, and other debt you have, bankruptcy may be an option. By filing for bankruptcy, you are getting rid of the underlying debt that the lawsuit is based on - hence the law suit is killed in its track.

If you did ignore the law suit, and your wage is garnished, it’s still not too late to file for bankruptcy and stop the garnishment. In fact, you may be able to recover up to 90 days of garnished wages by bringing an Adversarial Procedure in bankruptcy court.

If you are facing a law suit by Mann Bracken or another creditor, call a lawyer right away. We represent clients in the San Francisco Bay Area.

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Maxing Your Credit Limit? Think again!

Written by San Francisco bankruptcy attorney, Jeena Cho

So you’ve found yourself in dire straits. Your income is far less than your bills and you simply don’t know what to do next. You’ve decided to file for bankruptcy.

This is good.

The upsetting part is when I hear about people in that exact same situation who think deciding to file for bankruptcy is a free-pass. They think they can go out on shopping sprees and max out their credit card limits because they’re going to see all of their debts discharged.

Sounds tempting, doesn’t it?

Don’t do it.

Realistically speaking, the bankruptcy court is actually aware of such schemes and so are the credit card companies. Do you think if you run up your AMEX card and file for bankruptcy, AMEX will complain? - You betcha! The United States Trustee also monitors cases as well. The courts will decide which debts you get to discharge and they will not discharge debts that were obviously last-minute attempts to take advantage of the situation.

They have a word for it, too. It’s called fraud.

Even worse? Some people max out their credit cards and then give the goods to others to hold onto until after the bankruptcy is complete, hoping to protect that newly acquired property from seizure and sale. If the giver and receiver both know that the transaction is taking place to shield one from bankruptcy laws, both can get into trouble for breaking laws governing fraudulent transfers.

It sounds extreme, but it’s true. Spending money to keep your lights on is one thing. Buying a new wardrobe with “free” money you’ll never have to pay back is another situation altogether.

With the holidays rapidly approaching, it may be tempting to think, “Oh, I’ll just buy everyone gifts and then file for bankruptcy.” The risk you run is losing your discharge at best and possibly prison at worst. Don’t get yourself into trouble. Contact a San Francisco bankruptcy attorney like myself before you make such decisions. Lastly, you should always be honest with your attorney.

Image credit: Andres Rueda

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