2/11/2011 12:58 PM ET|
Right ways to hide from creditors
Can't pay back what you owe? It's important to know what steps you can take legally to protect yourself and what steps could get you into deeper trouble.
Life hasn't turned out the way you'd planned.
You certainly had intended to pay back the money you borrowed, but now you can't. What you may not realize is that your creditors have plenty of ways of getting whatever cash or assets you have left, with or without your permission.
You don't have to make it easy for them. Whether you're contemplating bankruptcy or just need a little breathing room while you get back on your feet, you can take steps legally to protect what 'you have left -- as long as you know how.
Before we start, let's lay down some important "don'ts," such as:
- Don't use your credit cards or lines of credit. As soon as you realize you're going to have trouble paying what you owe, stop borrowing. Any further use of your credit may constitute fraud. Not only is that wrong, but it could get your bankruptcy case thrown out of court if you ultimately decide to file.
- Don't transfer your money or belongings to others. Same deal: Trying to sneak your assets into other friendly hands can be considered "fraudulent conveyance." Even paying your mom back ahead of your other creditors can cause problems. Get good legal counsel -- more on that in a minute -- before you pay any creditors or move any assets, once you know can't pay everyone. And whatever you do, don't try to hide money by buying stuff like a car, real estate or jewelry. Anything purchased shortly before bankruptcy can be put up for creditor grabs or can get your case thrown out.
- Don't tap your retirement funds. The money in your workplace retirement funds has unlimited protection from creditors, while individual retirement accounts are protected up to $1 million. Breaking into these piggy banks is foolish on a number of levels. You incur hefty taxes and penalties when you tap your retirement funds prematurely because -- no surprise -- the government wants you to leave that money alone. If your financial problems are big, you're unlikely to solve them this way, so you're essentially throwing good money after bad. Also, draining retirement funds when you're young is a good way to wind up impoverished when you're old. Don't do it.
- Don't go it alone. Even if you're sure you can ride out your current problems, you don't know what you don't know. State laws vary widely when it comes to how much power creditors have and how miserable they can make your life. So scrape up a few bucks to consult an experienced bankruptcy attorney so you understand what's at stake and what your options are. Get referrals from the National Association of Consumer Bankruptcy Attorneys. Many of these attorneys offer discounted or even free initial sessions.
With all that said, here's what you need to do:
- Take action on your bank accounts. If you have checking or savings accounts at a bank that has also issued you a credit card, line of credit or other loan, the lender can seize money in those accounts once it realizes you can't pay. Move the money to a bank or credit union where you don't owe anything. If you don't owe the bank, you still need to take action by canceling any automatic-payment arrangements you have with other creditors. If the creditor ignores your request and processes a debit after you cancel the automatic payments, you may need to close the account and move your money elsewhere. If you get Social Security income, including retirement, disability and survivor benefits, that money is exempt and cannot be seized by creditors. New rules that went into effect last year require banks to protect a sum equal to the amount of federal benefits directly deposited into your account within the previous 60 days.
- Keep contributing to your retirement accounts. Suddenly dumping a bunch of money into a new IRA could cause problems if you file for bankruptcy later, but there's no reason to halt your regular contributions if you can continue to make them. Remember, this money is protected by law from creditors.
- Stay in touch with your creditors. Hiding your assets doesn't mean hiding yourself. Refusing to talk to your creditors may encourage them to take other steps to get your attention, such as filing a lawsuit that could result in a lien against your bank accounts or garnisheeing your wages, said Gerri Detweiler, a personal-finance expert for Credit.com. You don't want to say much -- just that you can't pay right now -- because offering other details can get you embroiled in discussions you don't want to have. One way to stay in touch while still controlling the interaction is to drop your current phone line and get two prepaid phones, one for friends and family and the other for dealing with creditors, advised Steve Rhode, a former creditor counselor who runs GetOutOfDebt.org.
- Get your stuff out of your car. If you're even one day late, you're in default on your car loan, and your ride can be repossessed. Lots of lenders are moving faster on repos these days, sometimes authorizing them in as few as 10 days after your missed payment, said Philip Reed, a senior consumer-advice editor for Edmunds.com. You can try hiding your car in a friend's garage or miles away from where you live, but chances are if you use the car, the repo man can find you. What you don't want to happen is to lose the car and also the tools you need for your job or that nice aftermarket sound system (put the original back, so there aren't gaping holes in the dash the lender can charge you for).
- Adjust your withholding. It's not smart to give the government a tax-free loan of your money, but it's especially not smart to build up a big tax refund if you owe Uncle Sam. Run-of-the-mill creditors can't nab your refund, but the Internal Revenue Service can if you owe back taxes. Your refund also can be seized for unpaid child support, student loans or any other government debt.
- Run, don't walk, to your attorney if you get sued. Legal action means you need legal protection. Don't ignore the lawsuit or assume it won't help to fight back. If you don't show up in court, your creditors could tack on unfair fees or ridiculous interest to what you already owe. And it's not uncommon for collectors to sue over debts that are legally too old: Once the debts are beyond your state's statute of limitations, which ranges from three to 15 years, creditors aren't supposed to be able to bring lawsuits against you, but you have to show up in court to point that out.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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Like an elderly man that took a small mortgage of 30,000 against a home his family has lived in for nearly 60 years and was valued at the time of about 150,000 and they charged him 18% interest was the avg rate was only 8%. Or an elderly woman who paid every month as soon as her ssn check came in, but fell 60 days behind 2 years earlier when her husband died and could never catch it up. I was the one who was ordered by my boss to foreclose on her rather than give her a 2 month forbearance , when they were perfectly willing to extend a 1 year forbearance on a real estate investor that hasn't paid in a year simply because his balance was 10 million and hers was only 67000.
Memphis93 I had to resond to your post. I am actually a bankruptcy attorney. Filing isn't as hard as you think it is and can give you a huge amount of relief. In most jurisdictions you can do a more generic listing of your goods and an estimate of value. And you don't actually have to sell all assets just assets in excess of your exemptions. You really should consider at least having a consultation with a attorney. As the article stated most of us offer a free consultation and we go from there if it is an appropriate option for you.
Filing a bankruptcy does not make you a deadbeat or mean you are running from your debts. There is also the option of filing a chapter 13 bankruptcy where you pay back your creditors through the court over 5 years. (not necessarily 100%)
Please anyone who is continuing to struggle right now consider talking to an attorney, we can help you to be more informed about your options.
Do not pay on your credit cards any more! Fight back, people! These credit card companies have been charging you 30% and more in interest! Regardless of what you are reading in these money articles, the companies will not sue you! They know they will never collect so it will never actually go to court! Remember two very important things: There is no such thing as debtors prison and also, these cases are CIVIL cases, not CRIMINAL cases! That being said, these credit card companies know that they will never collect any money. Here is how it works:
#1. They claim they will garnish wages. Sounds great huh? Just try to collect if you have no job. And if you are working, like most people your job is in jeapordy and also, the average American earns less than $500.00 a week. Poverty wages. Point is, you lose job, they get nothing. Ever. This equals wasted attorney fees (theirs) in court.
#2. They claim they will put a lien on your property. Good luck! Like most of the country, almost everyone owns more on their homes than the homes are worth. Even if the home is sold, oops! No money there!
My point is, they wont bother. The most you will get is an intent to sue, filed with your local courthouse, nothing more. There is absolutely nothing to be scared of regarding this. Again, this is meant to purposely scare you into some type of compliance. Just remember, Civil, not Criminal!
And please also note, the credit card companies are reading these same posts as you are, including mine, and they are frightened of what myself and others are writing to you. As a result, they are writing posts here, undercover, posing as just another reader such as you and I. They will write all kinds of scare tactics and also they will act as moralty junkies, attempting to make you feel guilty if you dont pay up. As if charging you 30% or more interest ( by trickery, I might add) is acceptable. And one more thing, lets see some actual court cases, complete with case numbers and dates and court locations of these so-called lawsuits that the credit card companies are supposedly pursuing in court!
Fight back, people! There is strength in numbers and there are many of us (myself included) now that are non-complying with all this out of control corporate greed.
Apparently you people are so superior that you don't understand there are people out there who try to take care of their financial responsibilities, yet still get stepped on. Who do you think cleans those nasty bathrooms at your office building? Those jobs don't pay the greatest, but someone has to do them...or would you rather do it yourself to save those people from having a job that doesn't pay worth a damn?
The article isn't saying go hide under a rock with all your money and assets to stay away from your debts forever! It's telling you what to do to bide yourself a little more time with the Nazi creditors to be able to pay back those debts eventually. Those creditors are compassionless people who will threaten anything that comes to their mind to try to scare you in to paying what you owe NOW, even if you can't afford it.
I recommend being in those shoes before you start calling people deadbeats and calling articles that can actually help people a joke.
Also, a lot is TWO WORDS! Go back to school!
This is in response to martymcfly4. I cannot believe that you actually made these statements. What is it about I lost my job and I cannot pay that you do not understand?
Well, let me explain it to you.
When one is working they have an income to rely on to meet their obligations. When one is not working they do not have an income to rely on, therfore they cannot pay their bills. They
struggle to make ends meet just for the necessities, like a place to live, food, utilities, gas,
etc, you know , survival. And that my Dear does not make them a thief. It's apparent that you
must be one of a few who was born with a silver spoon in your mouth and have never wanted
for anything in life for you to have written such stupid comments. Yes stupid, because people
are struggling, people are hurting and people are just trying to get by on a day to day basis.
Take your head out of the sand and look around to see what is really going on in this country.
Remember, you can't get blood out of a turnip! If you don't have the money, then how do you
expect people to pay their bills, with botttle tops??????????????????/
You may not want to but ultimately the best option is to file bankruptcy and get the debt off your back. I honestly doubt that anyone would be able to work out a sensible restructuring plan with a 90K debt unless you make a lot of money, which you don't. I've been where you are and I made the choice for Chapter 7. Even though my credit is shot, I no longer have to worry about all the phone calls and rude debt collectors. It can really wear on you because although the law requires them to abide by certain rules, they know how to wage a guerilla war with their tactics. Seriously, start thinking about it as an option.
Now if you want to have an enlightened discourse on the monetary system, "credit", "debt", and societal interaction thereof, there are two or three things you're going to have to study first.
- Read "Modern Money Mechanics" by the Federal Reserve, circa 1950s.
- OR, (save the headache in trying to understand their constant manipulation of terminologies and), read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin. (check your local Public Library.)
- Watch "Zeitgeist: Moving Forward". It can be watched, full length, on youtube by adding the following text after the dotcomslash: watch?v=4Z9WVZddH9w or by ordering it at their website, zeitgeistmovingforward.
Note to Mods: I don't get any compensation for any purchases made.
Not much of that made any sense whatsoever. But...the job of janitor was just an example of someone who would be getting stepped on by these people, while living within their means!
My argument is about those people you mentioned. They're used to a certain life style, but they pay all their bills and live within their means. Then, they lose their job...that savings they have is only for the basic necessities until they are able to get another job; not an easy task for most people in this economic downturn. But what about those creditors that still want their money regardless of the job situation? They don't care that the person lost his or her job, they just want their money. This article is for those people; telling them that they have options to put off paying these debts back in a legal way rather than spending all that savings within the first weeks of unemployment, not having any money left to live off of, and not knowing when they will get another job for the inflow of cash again.
I do agree with you on this: "Are they sitting on a mountain of debt because they have to have two or three cars, live in a $300K house with Ethan Allen furniture and three big screens while their kids are playing soccer, baseball, cheerleading, three or four cell phones with all the gadgets, textings, etc?"
These are the people who are living way outside of their means, regarless of their job. A house that expensive is unnecessary no matter where it's located.
You can find information on how your bank should be protecting your SSI, Disability, etc. by going to: Federal Register /Vol. 75, No. 74/Monday, April 19, 2010/ Proposed rules 20299
http//edocket.access.gpo.gov / 2010/pdf/2010-8899.pdf
Print it out, have your bank and their legal department go to page 3 for instructions on what they are supposed to be doing to protect your funds from creditors. I believe this article should have contained a link to this, since so many people are in financial jeopardy right now...Good luck...
Everyone else: I have worked in a collection agency for decades - Yes, there are some people that don't live within their means, but most folks only need to lose a job, go through a divorce, have a medical issue, etc. for their finances to spiral out of control. Before you accuse people of 'cheating' or being morally bankrupt, let me tell you that most people feel terrible that they are in this position; they feel ashamed and scared; understanding that they cannot honor their promise takes a terrible toll on their self-esteem and self-respect. As for bankruptcy: Would'nt you forgive a loan you made to a friend or family member if they were suddenly unemployed? Would you really expect them to pay you, rather than put food on the table for their children? Is that the Moral High Road you think these people should take?
1. Weston is right about something: People ARE being sued on debts that are out of statute, so show up at court and fight it.
2. If you or anyone you know is considering going to a Debt Settlement Firm, PLEASE look them up at BBB - This is a rogue industry that will claim to help but will only steal what little you have. I don't expect you to believe me, but do some research online before being victimized by these lying vermin: The mayor of NY is trying to shut them down, so is the FTC.
(A Debt Settlement Firm is NOT the same thing as an accrediated Consumer Counseling Firm such as CCCS).
Some qualifications to a few points here. First, you do want to use up those credit cards well in advance of walking away. You use them for your survival supplies and gear no less than three months prior to bailing out; six months is even better. It's just a matter of setting the walk away date, then getting the gear you need in advance of when your pre-determined "wind-down" time begins. By "wind-down" I mean paying only the absolute minimum needed to get you to the walk away date. If you have a solid gameplan, they can't say you blew out the plastic a week before bailing out.
It's also very wise to avoid transferring cash or assets to other parties. The experts call it fraudulent conveyance. I call "loose lips sink ships"; you are now bringing someone else into your gameplan who will more than likely be of no use to you. If your enemy threatens them with arrest, jail or forfeiture of their own assets, they will most likely squeal like a stomped pig. The only time this tactic should ever be employed is if that third party and yourself both have a solid understanding of Irish Republican Army battle tactics (IRA cells were set up in such a manner that two IRA members could be next door neighbors and neither would know that the other was an IRA member). This means absolute secrecy; you don't make it a topic of casual conversation with friends, relatives or colleagues.
Buying assets with your name on them, like cars or jewelry, is just plain dumb. You're advertising that you have a war chest somewhere, not to mention acting like a drug dealer. Once again, if you decide to do this, use caution and only do it to obtain hard currency assets such as physical gold in the form of bars or legal tender coins. Remember your fellow IRA soldier from the previous paragraph? This is who will make the purchase for you, so you want someone who won't send up red flags when the purchase is made. This person should also purchase a safe and rent a self storage over the state line, then give you the keys.
On the topic of BK attorneys, the best resource is your local lawyer referral office. They'll set you up with a free consultation with an attorney. You will likely find that this attorney is reluctant to take bankruptcy cases because of the current bankruptcy laws but this attorney will refer you to one of the best bankruptcy lawyers your state, often at a surprisingly low fee. Now your battle plan is simplified. You give the attorney the information necessary for you to get the BK7 you're looking for and keep your financial guerrilla warfare gameplan to yourself. Six months later you score yourself the BK discharge (you win!!!).
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