California tax and bankruptcy expert Morgan King writes in his latest newsletter:

“The IRS has begun certifying federal tax debts of more than $50,000 to the State Department, which poses problems for travelers. Why? Because the State Department generally won’t issue passports to taxpayers who have been flagged for delinquencies.

Internal Revenue Code 7345 allows this. Once the State Department is notified, it can either deny a passport application and/or revoke a current passport. If it happens while a taxpayer is out of the country, the State Department may issue what’s called a limited validity passport that only allows a taxpayer’s direct return to the U.S.

It’s a little-known secret — and too infrequently exercised right of a debtor — to “redeem” a car in Chapter 7 bankruptcy, that is, take the car back from the lender at what the car is worth, not what you owe.

Yes, you heard that right: A debtor in Chapter 7 bankruptcy has a right to take his or her car back from the lender at what the car is worth.

Section 722 of the bankruptcy code gives Chapter 7 debtors the right to force the lender, who is holding as collateral personal property intended primarily for personal, family or household use (such as the family car), to fully release its lien in exchange for a lump sum payment by the debtor of the retail value of the item.

It happens often:  Somebody has a debt and/or tax problem that’s been bothering them for  a while.  They know they should do something about it, but they find excuses.  The most typical excuse:  I can’t afford to pay for legal services.

Right now may be the time to get the situation fixed.  Many of our clients finance legal services from the tax refund they get this time of year.

And particularly, if you’re getting garnished, may as well keep it out of the hands of a creditor you’re going to discharge anyway, stop the garnishment and put that money to good use fixing that problem once and for all.

BEWARE HIGH-VOLUME TAX HELP ADVERTISERS
Evening TV commercials offering to help taxpayers with tax debts.They promise to help you solve your delinquent tax problems. But are they legit?

High volume advertisers typically collect hefty retainer fees from a large number of burdened taxpayers, make quick, superficial efforts to protect the taxpayers, often accomplish nothing – then change their names and come back the next week with more high-volume advertising. Some evenings five or six different advertisers make their pitch on local T.V.

The biggest money pit I see when I interview prospects with financial problems is the car — always.  I have even seen people paying half of their disposable income in car payments (plus insurance, tolls, repairs, maintenance, tickets and all the other costs we don’t often consider).  It’s insane.  Here’s a post from Jay Miles in Quora.com, in answer to a young man thinking about buying a Tesla, that says it perfectly:

No, don’t buy a car.  Cars don’t make money.  They’re depreciating assets.  You already have a wife, so there’s no need to show off.

Scammers are targeting bankruptcy filers throughout the country by posing as attorneys or law office staff and telling them to immediately wire money to pay a debt.

Don’t fall for it. One of the best ways to avoid a scam is to stop the caller and make a direct call to the supposed person or company. For example, if they say it’s your attorney’s office, stop and YOU PLACE THE CALL DIRECTLY TO THE OFFICE. You know you’ll be dealing with the real person or office, instead of a phony. Don’t be hurried by the caller. Situations of this type do not call for immediate action and can wait a day or a weekend if necessary.

Here’s the bulletin issued by the bankruptcy court serving northern Virginia (with information applicable to all jurisdictions):

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF VIRGNIA
CONSUMER ADVISORYALERT
Phone Scammers Target Bankruptcy Filers in Virginia and Other States

A sophisticated phone scam is targeting bankruptcy filers in several states, using personal information from filings and posing as attorneys to coerce intended victims to wire money to the scammers immediately to satisfy a debt.

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Probably one of the most frequent problems I encounter with new cases clients bring to my office is the lack of documentary evidence.

No one bothers to put down in writing that agreement with the brother-in-law or “friend” about the business they were starting together, the house one was going to buy (by signing on the mortgage) and which the other was going to “own” (by going on the title) and paying the mortgage, the investment they were going to make together, or any other manner of legal arrangements.

Then, when things “go south” and the “owner” does not pay the mortgage or the business fails (or even prospers, in which case you will see fights over profits), the differences in each person’s understanding of what was agreed becomes painfully obvious.

But what’s worse is that the prospective client has nothing in writing to back up his side of the story. It becomes a “he said / she said” dispute hard to win in court. Convincing a judge or jury of the rightness of your position is now just a coin flip.

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It may not be a well-know fact, but the truth is a lot of financially-responsible people are turned down for loans because they have NO history of recent borrowing. None.

This may be because the person saves up and pays for purchases without financing, or because they have not bothered to start building a new credit history by borrowing (and showing on-time payments) after a major financial event such as a bankruptcy or foreclosure.

After a bankruptcy discharge, a debtor needs to make sure that, after his or her case closes, there is a new credit history being reported with either new lines of credit that are opened, or old lines that were maintained and still being used.

Many of these individuals are credit-worthy but the current credit reporting and scoring system is not set up to evaluate this.

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Admitting it was a “bad boy” handling mortgages in bankruptcy, Chase recently entered a settlement with the federal government to compensate more than 25,000 US homeowners. The settlement is subject to court approval.

The United States Trustee Program, a unit of the Department of Justice whose attorneys at the bankruptcy court oversee the integrity of the system, announced on March 3 it had reached an agreement with Chase forcing it to pay homeowners $50 million in cash, mortgage loan credits and loan forgiveness for “robo-signing” and other improper practices before the bankruptcy court. Chase also agreed to change internal operations and submit to the oversight of an independent compliance reviewer.

Chase admitted it submitted more than 50,000 mortgage “payment change notices” that were signed by persons who had no knowledge of the accuracy of the notices they signed:

  • More than 25,000 of the notices were signed by employees or former employees who had nothing to do with reviewing the accuracy of the notices.
  • The rest of the notices were signed by employees of third party vendors who also were not involved in verifying the accuracy.

Chase also admitted it failed to file the notices in a timely fashion, as well as failing to provide timely escrow statements to homeowners in bankruptcy.

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It’s tax season and the scam artists are also out in force. Even our law office — which specializes in tax matters — recently got an email asking us to pay a phony tax bill!

There are a number of scams out there with criminals pretending to be IRS agents and contacting persons by email and telephone trying to get them to pay up a phony tax debt.

The single most effective rule to remember is this: IRS does not make initial contact with taxpayers by email. If there is a tax problem, you will be notified by mail. Period.

Below is a press release from IRS warning taxpayers about telephone scams that are also common.

IRS Reiterates Warning of Pervasive Telephone Scam

R-2014-53, April 14, 2014
WASHINGTON — As the 2014 filing season nears an end, the Internal Revenue Service today issued another strong warning for consumers to guard against sophisticated and aggressive phone scams targeting taxpayers, including recent immigrants, as reported incidents of this crime continue to rise nationwide. These scams won’t likely end with the filing season so the IRS urges everyone to remain on guard.

The IRS will always send taxpayers a written notification of any tax due via the U.S. mail. The IRS never asks for credit card, debit card or prepaid card information over the telephone. For more information or to report a scam, go to www.irs.gov and type “scam” in the search box.

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