Four married couples in New Jersey are facing serious charges after allegedly misrepresenting their income to receive more than $1 million in Medicaid, food stamps, and other government programs. One of the couples includes a New Jersey rabbi and his wife. According to an article on the WTKR website, Zalmen Sorotzkin, a rabbi at the Congregation Lutzk synagogue in Lakewood, was arrested Monday with his wife, Tzipporah, for improper collection of about $340,000 in Medicaid, food stamps, housing and supplemental security income from 2009 to 2014. Read more: Long Term Disability Lawyer , Trenton NJ Another couple, Mordechai and Jocheved Breskin, were also arrested. They’re accused of collecting about $585,000 in government benefits, prosecutors said. Both couples are accused of misrepresenting their income and failing to disclose other sources of income to government agencies in order to receive assistance. Because of their actions, the couples’ incomes were low enough to qualify for government assistance. All of the couples face charges of second-degree theft by deception. “Monday’s raids were ‘the first of multiple ongoing arrests’ in Lakewood regarding Medicaid and government assistance fraud, according to the prosecutor’s office,” WTKR reports. “The investigation is being done in conjunction with the FBI, the state comptroller’s office, the Social Security Administration and the state Department of the Treasury, the prosecutor’s office said.” Ocean County Prosecutor Joseph Coronato said in a statement that financial assistance programs are designed to help families who face hardships and are truly in need. “My office gave clear guidance and notice to the Lakewood community in 2015 of what is considered financial abuse of these programs. Those who choose to ignore those warnings by seeking to illegally profit on the backs of taxpayers will pay the punitive price of their actions.” During similar raids on Monday, two other couples, including Zalmen Sorotzkin’s brother Mordechai and his wife, Rachel, were also arrested on federal charges of conspiring to steal government funds. “The federal complaint alleges that Mordechai and Rachel Sorotzkin conspired to receive Medicaid benefits over a three-year period despite receiving more than $1.5 million in income. They’re accused of failing to report that income, which would have made them ineligible for the health care benefits,” the article reads. “In a separate case, Yocheved and Shimon Nussbaum allegedly underreported or failed to report their proper income to receive Medicaid, Section 8 housing and food stamps from 2011 to 2014, according to a criminal complaint.” They earned more than $1 million in both 2012 and 2013, according to the criminal complaint. In all, the Nussbaums accepted about $180,000 in government benefits to which they were not entitled, the complaint said. The post Four Couples, Including NJ Rabbi, Accused of Welfare Fraud appeared first on .

Many clients have contacted us regarding serial bankruptcy filers-people who filed for bankruptcy two or more times. Since 1984, Congress has been attempting to deal with debtors who took advantage of the automatic stay while making few or no payments to their creditors. This month, we’ll look at how the Bankruptcy Abuse and Creditor Protection Act of 2005 (BAPCPA) enhanced penalties for serial filers. Penalties Affecting the Automatic StayUnder Section 362(c)(3) of the Bankruptcy Code, if you filed bankruptcy under chapter 7, 11 or 13 and then file another bankruptcy under any chapter of the Code within one year of the dismissal of the first case, there is a presumption that you filed the second case in bad faith, and the automatic stay will expire after only 30 days. Under § 362(c)(4)(A)(i) of the Bankruptcy Code, if you filed two or more bankruptcies in the previous year, and then file a third bankruptcy, the same presumption of bad faith exists, and the automatic stay will not take effect at all upon the third filing (the “Three Strikes and You’re Out” rule). This limitation does not apply to a chapter 11 or chapter 13 case filed after the dismissal of a chapter 7 case for abuse under 11 U.S.C. § 707(b). You may file a motion with the court and ask for the automatic stay to be imposed, but you must present clear and convincing evidence that you filed the most recent bankruptcy in good faith. Under § 362(c)(4)(D)(ii) of the Bankruptcy Code, if a creditor filed a motion for relief from stay in the prior case that was pending or had been resolved by terminating or limiting the stay, the new case is presumptively not in good faith as to that creditor. Under Section 9011 of the Federal Rules of Bankruptcy Procedure, the Court may impose sanctions against the debtor or the debtor’s attorney for bad faith filings. Under § 362(d)(4) of the Bankruptcy Code, on request of a party in interest and after notice and a hearing, the Court shall grant relief from the stay by terminating, annulling, modifying, or conditioning the stay with respect to a stay of an act against real property by a creditor whose claim is secured by an interest in the real property, if the Court finds that the filing of the petition was part of a scheme to delay, hinder, and defraud creditors that involved multiple bankruptcy filings affecting the real property. Penalties Affecting Discharge Although the Bankruptcy Code does not per se prohibit serial filings, it does condition the ability to obtain a discharge based on a subsequent filing within certain time limits, as discussed below. Successive chapter 7 cases: Under § 727(a)(8) of the Bankruptcy Code, if you received your first discharge under a chapter 7, you cannot receive a second discharge in any chapter 7 case that is filed within eight years from the date that the first case was filed. A chapter 13 case and a subsequent chapter 7 case: Under § 727(a)(9) of the Bankruptcy Code, if your first discharge was granted under chapter 13, you cannot receive a discharge under any chapter 7 case that is filed within six years from the date that the chapter 13 was filed, unless payments under the plan in such case totaled at least 100 percent of the allowed unsecured claims in such case; or 70 percent of such claims; and the plan was proposed by the debtor in good faith, and was the debtor’s best effort. A chapter 7 case and a subsequent chapter 11 or chapter 13 case: Under § 1328(f)(1) of the Bankruptcy Code, if your first discharge was granted under chapter 7, you cannot receive a discharge under any chapter 11 or chapter 13 case that is filed within four years from the date that the chapter 7 was filed. Successive chapter 13 cases: Under § 1328(f)(2) of the Bankruptcy Code, if you received your first discharge under chapter 13, you cannot receive a second discharge in any chapter 13 case that is filed within two years from the date that the first case was filed. If you’ve previously filed for bankruptcy and are contemplating filing again, or if you’re a creditor with a claim against a serial filer, please contact Jim Shenwick.

  In STRATTON C. POLLITZER, Plaintiff-Appellant, v. GUY G. GEBHARDT, Acting United States Tr., Defendant - Appellee., No. 16-11506, 2017 WL 2766088 (11th Cir. June 27, 2017) the 11th Circuit ruled that a case could be dismissed in chapter 7 for failure to pass the means test, even though it had initially been filed under chapter 13; rejecting the debtor's argument that the section was limited to cases filed under chapter 7.     The court went back to the enactment of the 1984 bankruptcy act creating §707(b), wherein Congress believed the courts were not invoking the 'for cause' dismissal allowed prior to that act when debtor's had sufficient income to repay creditors, and included the provision to allow cases to be dismissed if  'substantially abusive.'  These provisions were further strengthened in the Bankruptcy Abuse and Consumer Protection Act of 2005, Congress again finding that too many debtors with income available to repay creditors were obtaining chapter 7 discharges.  BAPCPA created a presumption of abuse for these debtors.  This legislative history shows Congress intended §707(b) to be a potent tool for expeditiously dismissing chapter 7 cases that have income sufficient to repay creditors.  This intent would be eviscerated if debtors could file chapter 13 and simply convert to chapter 7 without being subjected to the abuse review incorporated in §707(b).  The 11th Circuit found it inconceivable that Congress intended such a result.  The Debtor's argument that there are other methods of dealing with such abuse, such as §105(a), was unavailing.  §707(b) was enacted precisely because these other provisions were not effective in preventing chapter 7 discharges of debtor's with the ability to repay their creditors.     Further, the Court's do not read statutory language in isolation.  Congress excluded several categories of cases from §707(b) (such as chapter 12 or if the case has not been converted under section 706 or 1112). When Congress includes particular language in one section of a statute and omits it in another, it is presumed to have done so intentionally.  Further Congress excluded categories of debtors, such as disabled veterans or those recently released from active duty, from §707(b) but failed to include converted cases in such exclusion.    Finally, when Congress passed BAPCPA it did not change Rule 1019(2)(A) Fed.R.Bankr.P. which sets a new time for filing a §707(b) motion in a case that has been converted from chapter 13 to chapter 7.  Congress is presumed to have been aware of this rule when BAPCPA was enacted, and such rule would be unintelligible if §707(b) did not apply to cases converted from chapter 13. Michael Barnett. www.tampabankruptcy.com

By STACY COWLEY and JESSICA SILVER-GREENBERG Raid your 401(k). Ask your boss for a loan, load up on your credit cards, or put upyour house as collateral by taking out a second mortgage.Those are some of the financially risky strategies that Pioneer Credit Recoverysuggested to people struggling to pay overdue federal tax debt. The company is oneof four debt collection agencies hired by the Internal Revenue Service to chase downlate payments on 140,000 accounts with balances of up to $50,000.The call scripts those agencies are using — obtained by a group of Democraticsenators and reviewed by The New York Times — shed light on how the tax agency’snew fleet of private debt collectors extract payments from debtors. On Friday, thosesenators sent a letter to Pioneer, the I.R.S. and the Treasury Department accusingPioneer of acting in “clear violation” of the tax code.In the letter, a copy of which was provided to The New York Times, the foursenators, led by Elizabeth Warren of Massachusetts, say that the I.R.S.’s contractorsare using illegal and abusive collection tactics.In particular, they object to Pioneer’s “extraordinarily dangerous” suggestion thatdebtors use 401(k) funds, home loans and credit cards to pay off their overdue taxes.“Pioneer is unique among I.R.S. contractors in pressuring taxpayers to usefinancial products that could dramatically increase expenses, or cause them to losetheir homes or give up their retirement security,” the senators wrote. “No other debtcollector makes these demands.”On Thursday, in advance of receiving the letter, the I.R.S. said it wascomfortable with the approach its outside collectors were taking. The agency “iscommitted to running a balanced program that respects taxpayer rights whilecollecting the tax debts as intended under the law,” said Cecilia Barreda, an I.R.S.spokeswoman.The debt collectors are paid on commission, keeping up to 25 percent of whatthey collect.Pioneer instructs its employees to “suggest that liquidating assets or borrowingmoney may be advantageous” and to “give the taxpayer ideas on where/how toborrow,” according to the scripts it submitted to the I.R.S. for approval. If that routedoes not work, the scripts show, Pioneer’s collection agents encourage taxpayers toask their family, friends and employers for money.All four of the collection companies hired by the I.R.S. — CBE Group, ConServe,Performant Recovery and Pioneer — tell debtors that they can set up an installmentplan lasting as long as seven years, two years longer than the span that privatecollectors are legally allowed to offer. The code that authorizes the I.R.S. to hireoutside collectors says that they may offer taxpayers installment agreements thatcover “a period not to exceed five years.”The I.R.S. said that payment plans lasting longer than five years were legal aslong as they were approved by the agency.“If the taxpayer agrees, and after the I.R.S. approves, the private firm willmonitor payment arrangements between five and seven years,” Ms. Barreda said.“This process is in accordance with the law and ensures that taxpayers assigned tothe private firms will have the same payment options as taxpayers dealing with theI.R.S.”Others disagree with the agency’s interpretation. Nina E. Olson, the nationaltaxpayer advocate at the I.R.S., said that the agency was engaging “in legalisticgymnastics to justify something the law doesn’t allow.”The I.R.S. is owed about $138 billion, a sum that lawmakers are eager to reduce.To supplement the agency’s collection efforts, Congress ordered it to hire outsidefirms — an approach that was tried twice before, in 1996 and in 2006, and thenabandoned because of cost overruns and concerns about abuses. Lawmakers hopethe new program, which began this year, will yield better results; the congressionalJoint Committee on Taxation estimated that it could net $2.4 billion over the next 10years.But consumer advocates, including Ms. Olson, view the project with alarm,fearing that aggressive collectors will push troubled people to the financial brink andhound them for payments they cannot afford.To consumer advocates, the call scripts seem to realize their fears. All of thecollection companies encourage taxpayers who may not be able to fully pay off theirtax bill, even through installments, to make a one-time voluntary payment. Three ofthe agencies instruct debtors that “extra payments or higher payments can beaccepted at any time.”That kind of “give us anything you can” approach is common among consumerdebt collectors, but the government has typically been more measured, weighingwhat is owed against what the taxpayer can reasonably afford. When taxpayerscannot pay their entire bill at once, the I.R.S.’s internal collectors are generally onlypermitted to place them into installment plans that will fully resolve their debt.The idea is that pushing taxpayers to the limit, while temporarily good for theI.R.S., causes long-term strain on the government over all. No one wins, the theorygoes, when taxpayers wind up on public assistance from settling overdue tax bills.The I.R.S. does not try to collect from people who make only enough to afford basicliving expenses like food, housing and transportation. (Only one collector,Performant, had lines in its scripts about how to handle hardship cases. Thoseaccounts should be marked and returned to the I.R.S., Performant instructed itsemployees.)Low-income taxpayers make up most of the cases farmed out to the privatecollectors, according to an analysis by Ms. Olson. After reviewing the first batch offiles the I.R.S. sent to outside collectors, her office found that nearly a quarter of theaccounts involved taxpayers with below-poverty level wages, and more than halfwere taxpayers with incomes of less than 250 percent of the poverty level.Ms. Olson said she was “deeply concerned” by collectors suggesting thattaxpayers borrow against their retirement savings, take out home loans or increasetheir other debts to pay their taxes.“The I.R.S. may suggest those things, but the I.R.S. is authorized to perform afinancial analysis of a taxpayer’s ability to pay, and it does not collect from taxpayerswhere its financial analysis shows doing so would impose a financial hardship,” shesaid by email.Pioneer, a subsidiary of Navient, was effectively fired two years ago by theEducation Department from its contract to collect overdue student loan debt afterthe agency determined that it gave borrowers inaccurate information about theirloans at “unacceptably high rates.” Pioneer was sued this year by the ConsumerFinancial Protection Bureau, which said it “systematically misled” borrowers.Navient is fighting the consumer bureau’s lawsuit and has denied anywrongdoing. It declined to comment on its tax debt collection efforts, referringquestions to the I.R.S. The other three collectors did not respond to questions abouttheir call scripts.For its part, the I.R.S. said that it supported its private collectors’ tactics.The agency “encourages people to look into options for paying their tax debt,including things such as installment agreements,” Ms. Barreda said in a writtenresponse to questions about the call scripts. “How they pay is a personal choice.Giving taxpayers ideas of possible borrowing sources to pay their tax liability isconsistent with fair debt collection practices as well as I.R.S. practice.”But Ms. Warren and the three other Democratic senators who sent the letter onFriday — Sherrod Brown of Ohio, Benjamin L. Cardin of Maryland and Jeff Merkleyof Oregon — took exception to these collections practices. They particularly criticizedthe extended payment offers and the encouragement for debtors to send in “extrapayments,” both of which they said violated the I.R.S. code.The law “allows collectors to ask only for a payment in full, or an installmentagreement providing for full payment over a maximum period of five years,” thesenators wrote. “When Congress required the I.R.S. to hire private debt collectors tocollect certain tax debts, it did so under strict provisions to ensure that taxpayerswere not put at risk during the collection process, but it appears that Pioneer is notadhering to these protections.”The I.R.S.’s last effort to outsource debt collection was deemed a failure by theagency, which eliminated the program in 2009 and said that its internal staff couldhandle the work more efficiently. The program wound up costing the federalgovernment millions more than it actually recouped from taxpayers.The latest attempt stems from a 2015 provision, buried in a $305 billionhighway funding bill, that required the agency to outsource some of its collection.President Trump’s Treasury secretary, Steven T. Mnuchin, said his departmentwould monitor the effort.“In general, I am supportive of using outside firms on a contingency basis afterall other means have been used,” he said at a congressional hearing last week. “Ithink it’s a balance between making sure the government collects money efficientlyand appropriately with making sure we don’t jeopardize taxpayers.”© 2017 The New York Times Company.  All rights reserved.

By STACY COWLEY About 12 million people will get a lift in their credit scores next month as thenational credit reporting agencies wipe from their records two major sources ofnegative information about borrowers: tax liens and civil judgments.The change stems from a lengthy crusade by consumer advocates andgovernment officials to force the credit bureaus to improve the accuracy of theirreports, which are often speckled with errors and outdated information. Thosemistakes can limit borrowers’ access to credit cards, auto loans and mortgages, orsaddle them with higher borrowing costs.Starting July 1, the three major credit reporting companies — Equifax, Experianand TransUnion — will enforce stricter rules on the public records they collect,requiring each citation to include the subject’s name, address and either their SocialSecurity number or date of birth. Nearly all civil judgments and at least half of thenation’s tax lien records do not meet the new standards, and will be eliminated fromconsumer credit reports.The change will benefit borrowers with negative public records, but it will alsohelp thousands of people who have battled, often in vain, to have incorrectinformation removed from their files.“We’ve filed hundreds of lawsuits over this,” said Leonard Bennett, a consumerlawyer in Alexandria, Va. “Comprehensively fixing it hasn’t been something theindustry has prioritized.”That began to change two years ago, when a coalition of 31 state attorneysgeneral cracked down on the credit bureaus and negotiated a deal that requiredsweeping changes to their practices. (New York’s attorney general had previouslyreached a separate settlement with similar terms.) The credit bureaus have alreadymade some adjustments, like removing traffic tickets and court fines from their files,but next month’s changes will have the broadest effects yet.Around 7 percent of the 220 million people in the United States with creditreports will have a judgment or lien stripped from their file, according to an analysisby Fair Isaac, the company that supplies the formula that generates the credit scoresknown as FICO.Those people will see their scores rise, modestly. The typical increase will be 20points or less, according to Fair Isaac’s analysis. (FICO scores range from 300 to850. Higher is better; lenders generally prefer people with scores of 640 and above.)The biggest beneficiaries, consumer advocates say, will be those who are sparedthe frustration of trying to fix errors. False matches have been a common problem.Without the kind of additional identifying information that will now be required, acourt record showing a judgment against Joe Smith can easily wind up on the wrongJoe Smith’s credit report. (Last week, a California jury awarded $60 million to agroup of consumers who said TransUnion falsely flagged some of them as terroristsand drug traffickers because it had mistaken them for others with similar names.)Starting next month, the credit bureaus will also be required to update theirpublic records information at least once every 90 days.That change pleases Brenda Walker, a Virginia resident with a pending lawsuitagainst TransUnion over the company’s monthslong delay in amending her report toshow that a tax lien had been satisfied.Ms. Walker said she had been turned down for credit cards, a car loan and astudent loan she tried to take out for her daughter’s education. “It wreaked havoc,”she said. “My credit score was so damaged from something that had already beenpaid and released.”The flip side of the change, lenders warn, is that some borrowers may nowappear more creditworthy than they actually are.“This removes information from the picture that our customers get about what aborrower has done in the past,” said Francis Creighton, the chief executive of theConsumer Data Industry Association, which represents credit reporting companies.“If someone has a big bill that they owe, that’s something that should be part of theconversation.”But when the two largest credit scoring companies, Fair Isaac andVantageScore, tested what happens when tax liens and civil judgments are removed,both found that it did not meaningfully change the snapshot provided to lenders onmost borrowers.More than 90 percent of people with a negative public record have othernegative information on their credit file, like late payments, according to FICO’sanalysis. VantageScore experimentally tweaked its model to focus on other datapoints, like the number of credit cards a borrower has with high balances, and foundthat the predictive value was almost identical.“Not surprisingly, those with civil judgments and tax liens are likely to have lotsof other credit blemishes,” said Ethan Dornhelm, Fair Isaac’s principal scientist.“These changes aren’t going to bring those people into the tiers where they’re goingto qualify for prime credit.”As public records disappear from the big bureaus’ reports, other data providersare eager to step in and fill the gap. LexisNexis Risk Solutions has for years gatheredpublic records information from about 3,000 jurisdictions around the country andsold it to the credit bureaus. Now, with that business drying up, the company ismarketing its own Liens and Judgments Report to lenders.Because LexisNexis is not a party to the credit bureaus’ settlement, it is still freeto sell that information, said Ankush Tewari, a senior director with LexisNexis RiskSolutions. The company can accurately link people to their public records, evenwithout identifying information like a Social Security number, with an error rate ofaround 1 percent, he said.As the credit bureaus continue to work through the settlement terms, furtherchanges are coming. Starting in September, their reports will eliminate medical debtcollection accounts that are less than six months old, a change intended to reflect thesometimes-lengthy process of sorting out health insurance reimbursements.Also that month, all data furnishers — the companies that provide informationabout consumers to the credit bureaus — will be required to include each individual’sfull name, address, birth date and Social Security number in their reports.© 2017 The New York Times Company.  All rights reserved.

Supreme Court Knocks a Hole in the Fair Debt Collection Practices Act On June 12, 2017, the Supreme Court knocked a hole in consumers’ rights under the Fair Debt Collection Practices Act. Starting now, debt buyers, like Midland, Portfolio Recovery, and Cavalry are free of the regulations under the FDCPA.  Here’s my list of the […] The post Supreme Court Knocks a Hole in the Fair Debt Collection Practices Act by Robert Weed appeared first on Robert Weed.

Supreme Court Knocks a Hole in the Fair Debt Collection Practices Act On June 12, 2017, the Supreme Court knocked a hole in consumers’ rights under the Fair Debt Collection Practices Act. Starting now, debt buyers, like Midland, Portfolio Recovery, and Cavalry are free of the regulations under the FDCPA.  Here’s my list of the […]The post Supreme Court Knocks a Hole in the Fair Debt Collection Practices Act by Robert Weed appeared first on Robert Weed.

Deciding to file bankruptcy is a really personal decision. But there are a few red flags which probably mean it's a really good option. So if you're considering going into your retirement account and borrowing money to pay off unsecured debts like credit card debts and medical debts, that's a pretty good sign that it might be time to file bankruptcy. Look your retirement funds are earmarked for your retirement. They are 100 percent exempt in bankruptcy. So if we file a bankruptcy for you nobody can touch your retirement account. So why would we take the money out of your retirement account and pay off debts that are dischargeable in bankruptcy. It probably doesn't make sense. The post Bankruptcy Attorney in Tucson, Arizona appeared first on Tucson Bankruptcy Attorney.

By Jessica Silver-Greenberg and Michael CorkeryMore than a decade after Yvette Harris’s 1997 Mitsubishi was repossessed, she is stillpaying off her car loan.She has no choice. Her auto lender took her to court and won the right to seize aportion of her income to cover her debt. The lender has so far been able to garnish$4,133 from her paychecks — a drain that at one point forced Ms. Harris, a singlemother who lives in the Bronx, to go on public assistance to support her two sons.“How am I still paying for a car I don’t have?” she asked.For millions of Americans like Ms. Harris who have shaky credit and had to turnto subprime auto loans with high interest rates and hefty fees to buy a car, there is nogetting out.Many of these auto loans, it turns out, have a habit of haunting people long aftertheir cars have been repossessed.The reason: Unable to recover the balance of the loans by repossessing andreselling the cars, some subprime lenders are aggressively suing borrowers to collectwhat remains — even 13 years later.Ms. Harris’s predicament goes a long way toward explaining how lenders,working hand in hand with auto dealers, have made billions of dollars extendinghigh-interest loans to Americans on the financial margins.These are people desperate enough to take on thousands of dollars of debt atinterest rates as high as 24 percent for one simple reason: Without a car, they haveno way to get to work or to doctors.With their low credit scores, buying or leasing a new car is not an option. Andwhen all the interest and fees of a subprime loan are added up, even a used car withmechanical defects and many miles on the odometer can end up costing more than anew car.Subprime lenders are willing to take a chance on these risky borrowers becausewhen they default, the lenders can repossess their cars and persuade judges in 46states to give them the power to seize borrowers’ paychecks to cover the balance ofthe car loan.Now, with defaults rising, federal banking regulators and economists areworried how the strain of these loans will spill over into the broader economy.For low-income Americans, the fallout could, in some ways, be worse than themortgage crisis.With mortgages, people could turn in the keys to their house and walk away. Butwith auto debt, there is increasingly no exit. Repossession, rather than being the end,is just the beginning.“Low-income earners are shackled to this debt,” said Shanna Tallarico, aconsumer lawyer with the New York Legal Assistance Group.There are no national tallies of how many borrowers face the collection lawsuits,known within the industry as deficiency cases. But state records show that the courtsare becoming flooded with such lawsuits.For example, the large subprime lender Credit Acceptance has filed more than17,000 lawsuits against borrowers in New York alone since 2010, court recordsshow. And debt buyers — companies that scoop up huge numbers of soured loans forpennies on the dollar — bring their own cases, breathing new life into old bills.Portfolio Recovery Associates, one of the nation’s largest debt buyers, purchasedabout $30.2 million of auto deficiencies in the first quarter of this year, up from$411,000 just a year earlier.One of the people Credit Acceptance sued is Nagham Jawad, a refugee fromIraq, who moved to Syracuse after her father was killed. Soon after settling into hernew home in 2009, Ms. Jawad took out a loan for $5,900 and bought a used car.After only a few months on the road, the transmission on the 10-year-old ChevyTahoe gave out. The vehicle was in such bad shape that her lender didn’t bother torepossess it when Ms. Jawad, 39, fell behind on payments.“These are garbage cars sold at outrageous interest rates,” said her lawyer, GaryJ. Pieples, director of the consumer law clinic at the Syracuse University College ofLaw.The value of any car typically starts to decline the moment it leaves the dealer’slot. In the subprime market, however, the value of the cars is often beside the point.A dealership in Queens refused to cancel Theresa Robinson’s loan of nearly$8,000 and give her a refund for a car that broke down days after she drove it off thelot.Instead, Ms. Robinson, a Staten Island resident who is physically disabled andwas desperate for a car to get to her doctors’ appointments, was told to pick adifferent car from the lot.The second car she selected — a 2005 Chrysler Pacifica — eventually brokedown as well. Unable to afford the loan payments after sinking thousands of dollarsinto repairs, Ms. Robinson defaulted.Her subprime lender took her to court and won the right to garnish her incomefrom babysitting her grandson to cover her loan payments.Ms. Robinson and her lawyer, Ms. Tallarico, are now fighting to get thejudgment overturned.“Essentially, the dealers are not selling cars. They are selling bad loans,” saidAdam Taub, a lawyer in Detroit who has defended consumers in hundreds of thesecases.Many lawyers assisting poor borrowers like Ms. Robinson say they learn aboutthe lawsuits only after a judge has issued a decision in favor of the lender.Most borrowers can’t afford lawyers and don’t show up to court to challenge thelawsuits. That means the collectors win many cases, transforming the debts intojudgments they can use to garnish wages.The lenders argue that they are just recouping through the courts what they arelegally owed. They also argue that subprime auto lending meets an important need.And collecting on the debt is a critical part of the business. The first item on thequarterly earnings of Credit Acceptance, the large subprime auto lender, is not theamount of loans it makes, but what it expects to collect on the debt.The company, for example, expects a 72 percent collection rate on loans made in2014 — the year that a used 2009 Volkswagen Tiguan was repossessed from NinaLysloff of Ypsilanti, Mich.With all the interest and fees on her Credit Acceptance loan factored in, the carended up costing her $28,383. Ms. Lysloff could have bought a brand-newVolkswagen Tiguan for $22,149, according to Kelley Blue Book.When Ms. Lysloff fell behind, the trade-in value on the car was a fraction ofwhat she still owed. Last year, Credit Acceptance sued her for $15,755.The strategy at Credit Acceptance, which has a market value of $4.4 billion, isyielding big profits. The Michigan company said its return on equity, a measure ofprofitability, was 31 percent last year — more than four times Bank of America’sreturn.Credit Acceptance did not respond to requests for comment.Some of the people who got subprime loans lacked enough income to qualify forany loan.U.S. Bank is pursuing Tara Pearson for the $9,339 left after her 2011 HyundaiAccent was stolen and she could not pay the fee to get it from the impound lot. Whenshe purchased the car in 2015 at a dealership in Winchester, Ky., Ms. Pearson said,she explained that her only income was about $722 from Social Security.Her loan application listed things differently. Her employer was identified as“S.S.I.,” and her income was put at $2,750, court records show.Citing continuing litigation, U.S. Bank declined to comment about Ms. Pearson.Auto lending was one of the few types of credit that did not dry up during thefinancial crisis. It now stands at more than $1.1 trillion.Despite many signs that the market is overheating, securities tied to the loansare so profitable — yielding twice as much as certain Treasury securities — that theyremain a sought-after investment on Wall Street.“The dog keeps eating until its stomach explodes,” said Daniel Zwirn, who runsArena, a hedge fund that has avoided subprime auto investments.Some lenders are pulling back from making new loans. Subprime auto lendingreached a 10-year low in the first quarter. But for those borrowers already stuck withdebt, there is no end in sight.Ms. Harris, the single mother from the Bronx, said that even after her wages hadbeen garnished and she paid an additional $2,743 on her own, her lender was stillseeking to collect about $6,500.“It’s been a nightmare,” she said.Copyright 2017 The New York Times Company.  All rights reserved.

Initial Facts This is a bankruptcy case study for Ms. F. who resides in Aurora, Illinois. She is in the office to determine whether or not she can qualify for chapter 7, the fresh start bankruptcy. Otherwise, she is potentially interested in a chapter 13 bankruptcy case which is a reorganization of debts. Let’s look+ Read More The post Bankruptcy Case Study For Ms. F., From Aurora, Illinois appeared first on David M. Siegel.