In the short term, not consulting an attorney before signing a landlord tenant lease agreement, marketing contract, sales contract, employment contract or other business agreement may seem like the right thing to do.  In the longer term, Adams Law handles many disputes over money resulting from all these business contracts and agreements.

Adams Law, Your Neighborhood Law Firm, works with clients involved in business disputes in a practical manner.  For example, we have the reputation in the legal community of assisting with quick settlement, which usually makes more sense to clients than charging up hourly legal fees.  The key is “what’s in the best interest of the client,” not what’s in the best interest of the lawyers.

The biggest  subject of complaints  has been  Portfolio Recovery Associates, Inc., identified in the WSJ article as “a buyer of distressed consumer debts.”  The largest civil penalty in U.S. history ($2.8 million) was awarded in March against West Asset Management of Omaha, NE.

The FTC disclosed information to the WSJ following a public records request, the article said.

Through November, 7% fewer bankruptcy cases were filed in 2011 verus 2010, according to statistics on the website of U.S. Bankruptcy Court, District of Colorado.  While figures aren’t yet available for December, it would seem that filings will continue to track lower for the year 2011 versus 2010.

Most Coloradans file for Chapter 7 relief, which allows for a foregiveness of most unsecured debt.  Figures through October, 2011, suppored this fact, to the tune of about 83% of filings.  That’s about the same as in 2010.

Second most used is Chapter 13 relief, which allows a short time period for debtors to reorganize, to have future interest stop, and to pay some portion (e.g. 50 cents on the dollar) on their debt over a 60-month repayment period.  Figures through October, 2011, indicate that about 17% of Coloradans filed for Chapter 13 relief.

Very few businesses and individuals sought Chapter 11 relief, and only 112 had done so through October.  Only two Colorado farmers filed for Chapter 12 relief through October.

Not counted in the Chapter 7 filings are Involuntary Petitions whereby creditors force debtors (e.g. who have committed fraud) into Chapter 7 bankruptcy liquidation to recover preferential transfers.  The court estimates these filings at about a dozen or 20 per year.

According to last weekend’s WSJ article quoted in our last blog, Coping with Debts of the Dead, America’s Elderly are incurring unsecured credit card debt faster than other age groups.

“Debt among Americans between the ages of 65 and 74 is growing faster than for any other age group, according to the Federal Reserve.  As of 2007, the latest year for which figures were available, the median debt level of that age group was $40,130, up from $27,458 in 2004….  Strategic Business Insights’ Macromonitor conducted a separate survey and found that households headed by Americans 75 and older carried an average of $7,200 in credit-card debt in 2010, more than triple the 2008 level.”

This holiday season, perhaps it’s time to make sure Grandma and Grandpa aren’t financially distressed.

As part of the process described that seems to me like Elder Abuse, the big banks  including Bank of America, Capital One and Discover use collections agencies like DCM Services and West Asset Management to attempt to collect such debt — debt that may not legally have to be paid.  Techniques such as misrepresentation, condolence cards that double as collection letters, calls that begin as if the caller is offering grief counseling, and using language that attempts to convince the survivors that paying off the debt is a “morality payment” — all these techniques are used in an attempt to obtain payments.

A most egregious tactic described in the article involved DCM Services allegedly telling a woman from Michigan that not paying her late father’s credit card balance of about $6,000 would result in the unsecured creditor seizing the father’s home.  In this instance the creditor with a $6,000 amount owed  was not a secured creditor and had no security interest in this man’s house, so the threat  of seizing the father’s home was just a threat.  The WSJ reports that the Florida Attorney General is looking into this case, and both DCM Services and West Asset Management declined to comment.

The article quotes from a recorded call by West Asset Management with Linda Long (68), whose husband died of cancer last year with outstanding unsecured debt in the amount of $16,651 on a Bank of America credit card.  This alleged activity is likely very commonplace.  During the call with Mrs. Long, the debt collector attempted to settle the account for $12,500, asking “if there’s any family member thta can maybe help with the situation.”  Several calls and weeks later, when all Mrs. Long indicated she had left in her deceased husband’s estate was $2,000 from an insurance proceeds payout, the caller readily agreed to take that amount.

The truth was that Mrs. Long couldn’t afford to pay anything and she had no obligation to pay for her deceased husband’s unsecured debt.  The debt was not jointly signed for, as her name was not listed as a co-debtor on the account.  She paid anyway in a frustrated effort to stop the collectors from calling.  The debt was unsecured, as opposed to being secured by collateral such as a car on a car loan or by a house on a mortgage.  The debt was solely in her deceased husband’s name.  Mrs. Long had no obligation to pay, yet she did.  Ss the article pointed out, such debt collectors are paid up to 40% for such payments, much higher than collections on other types of debts.

Such collections practices seem dead wrong.  America’s elderly population, and anyone who is grief stricken by the loss of a loved one, needs help in standing up to such coercive tactics.

Yet help may be the opposite of what the United States Federal Trade Commission (FTC) recently changed by issuing a July, 2011, “policy statement,” according to the article.  Before this  policy statement was issued, debt collectors could only pursue the deceased person’s spouse.  Pursuing the spouse of a recently deceased is bad enough during a grieving period, but the policy statement changed the collections rules such that collectors could also target “anyone believed to be handing the estate, including parents, friends and neighbors.”  The agency reportedly also declined  to impose a cooling-off period during which relatives  couldn’t be contacted by the debt collectors.

For Linda Long and others who are being targeted using such aggressive collections tactics, talking with a reputable consumer rights attorney might be the best option.

In today’s WSJ report on changes in an S&P index of home prices, home building consulting firm president John Burns is quoted as saying home purchasers are only buying when they get a great deal, a sentiment that I would relate to the news over last weekend’s consumer spending related to Black Friday and Black Monday deals for consumer goods.

“Buyers don’t want to tell their friends ‘I bought a home.’  People look at you sideways.  But if it’s a foreclosure, they pat you on the back,” Burns said.  “People need to feel like they’re getting a great deal.”

Whereas a couple of years ago bankruptcy articles in the popular press were virtually nonexistent, Denver Post and Wall Street  Journal have reported on Chapter 11 bankruptcy filings nearly on a daily basis as we approach the end of 2011.

The WSJ reports that the parent of American Airlines filed for Chapter 11 bankruptcy protection with about $30 billion in debt, most of it secured by collateral that could be repossessed by creditors, about $25 billion in assets, and — this  is what is interesting — more than $4 billion in cash on hand.  This high amount of cash ”surprised some industry observers but drew praise from bankruptcy experts.”  This is because — whether it’s a big corporation  seeking Chapter 11 debt relief or an individual seeking Chapter 7 relief — too often people and companies wait too long before seeking the relief that they deserve.

“Cash is critical to a successful restructuring in bankruptcy,” bankruptcy attorney for AMR (American’s parent company) Tom Roberts is quoted as saying.  I would add that cash is critical to a personal restructuring through a Chapter 13 as well as to a personal debt liquidation through a Chapter 7.  Mr. Roberts is further quoted: “Problem is, if we waited any longer, we may have adversely affected our ability to successfully restructure.”

Attorney Eric Schaffer, who is quoted as having worked on past airline restructurings, said AMR’s filing appears to have been “very well planned.”  The article features a graphic showing six Chapter 11 filings since 2000 by major airlines: US Airways filed in 2002 and emerged in 2003, then filed again in 2004 only to emerge in 2005 through a merger with America West; TWA filed in 2001 only to emerge in 2001 through a merger with American; United filed in 2002 and emerged four years later; Northwest and Delta separately filed in 2005, both emerged in 2007, and then the two carriers mergged in 2008.

WSJ reported that AMR said its annual labor costs including pensions are about $800 million more than rivals, a figure unions dispute.  Now labor groups will have to compete with other creditors, leasing firms and others for a position on the creditor’s committee during the bankruptcy process.  The creditor’s committee in a Ch 11 filing is ultimately apppointed by a Justice Department representative.

AMR’s stock price has dropped, WSJ reported, from a January high of $8 per share to a low yesterday of $0.26.

While many of our neighbors are distressed due to their finances in the middle of our recession, there is a necessity to understand the available options for the resolution of financial difficulties. 

            The economic figures for Colorado are bad in general:

• In 2010, there were 31,415 personal bankruptcies in Colorado.

• According to the Colorado Public Trustees, banks in Colorado have filed 15,348 foreclosures up to the end of July 2011.

• In February 2011, the unemployment rate in Colorado was 9.3%, the highest number in history for the state, according to the statistics of the Bureau of Labor Statistics.

          Thousands of Colorado and Denver residents have had relief from the threat of foreclosure with the counseling and referral services of the Colorado Foreclosure Hotline, 877-601-HOPE (4673). The U.S. Congress has passed legislation that continues benefits for the long-term unemployed.

            I want to use this space to discuss the option of bankruptcy that is in use more and more in these difficult times. According to Bradford L. Bolton, Clerk of the U.S. Bankruptcy Court in the District of Colorado, these months of unprecedented filings of personal bankruptcies come behind those of foreclosures and unemployment, because creditors need time to place pressure on the families that suffer from unemployment and foreclosures. Due to this, we can suppose that the rates of filing for bankruptcy will continue to grow.

            The lawyers practicing in federal bankruptcy courts have a lot of work. Even though bankruptcy is a big decision, it is a rational thing for many families in debt. To file a Chapter 7 bankruptcy gives a family a chance to maintain significant equity in their home, to keep their cars and other necessities, and still have a new start free from debt of medical bills, credit cards, and other debt. To file a Chapter 13 bankruptcy gives a family a chance to keep their property and make affordable payments to get out of debt.