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Debt buyers pay pennies on the dollar for the right to collect delinquent credit card balances and other consumer debt, but they do not often pay the creditor for the back-up documentation. After a lawsuit is filed in Florida, if the consumer’s attorney requests that such documentation be produced, and the debt buyer fails to do so, the lawsuit can be dismissed. In Florida, documentation upon which the claim relies must be attached to the initial Complaint but it often is missing. Since most cases go unchallenged, the debt buyer gets a judgment without having proved its case.

However, more consumers are recognizing that hiring an attorney to defend a debt buyer’s lawsuit can help. As a result there is an uptick in dismissals is resulting from the assembly line debt buyer lawsuits. One of the frequent approaches taken by consumer’s counsel is that they ask for the affidavits upon which the debt buyers rely to prove up the debt be stricken when the supporting documentation is not provided. In Florida, all affidavits used in connection with summary judgment must attach the books and records upon which the affiant reviewed and relied. In some cases, the documentation is contracdictory such as in an alleged assignment of the debt where the assignment does not exist or it is faulty. Riddle v. Unifund CCR Partners, 298 S.W. 3d 780 (Tex. Ct. App. 2009).

Affidavits can also be challenged for admissibility when the business records exception to hearsay is found to not apply. Many counsel skip over challenging the application of the business records exception, but it can be a very valuable tool. For instance a Missouri appellate decision in Asset Acceptance v. Lodge, 2010 WL 3759538 (Mo. Ct. App. Sept. 28, 2010), stated:

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Complaints regarding creditor debt collection agencies, debt buyers, collection attorneys, and many mortgage servicers generate more complaints to the Federal Trade Commission (FTC) that any other industry. In additon to the Fair Debt Collection Practices Act (FDCPA), Florida consumers can take advantage of the Florida Consumer Collection Practices Act (FCCPA). One key difference is that the FDCPA applies only to debt collectors and it excludes its protections when the original creditor is collecting its own debt. In Florida, the FCCPA protects consumers from both debt collectors and original creditors. Another reason why Florida’s law is more expansive is that extends the $1,000 in statutory damages to multiple violations allowing for a greater recovery than the one time $1,000 available under the FDCPA regardless of the number of violations.

Complaints of illegal debt collection and abusive tactics rose from 5,064 in 1999 to 26,652 in 2009. Higher levels of unsustainable debt is part of the reason for such a significant increase, but more likely it is due to the fact that the collections industry makes millions of autodialed calls every business hour.

More attorneys are stepping up in an effort to enforce consumers’ rights by filing FDCPA and FCCPA lawsuits. Our law firm began taking FDCPA and FCCPA cases at the beginning of 2010 as a natural offshoot of our bankruptcy practice. Many more bankruptcy attorneys are recoginizing that the overly aggressive actions by creditors are splitting families, causing job losses and significant emotional distress in the more egregious cases.

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Florida’s Middle District which covers Tampa, Orlando, Fort Myers and Jacksonville was second only to the Los Angeles district in bankruptcy filings from October 2009 to September 2010. The Florida Middle District recorded 66,861 bankruptcy filings including all chapters.

That translates to approximately one person out of 100 in these two districts declared bankruptcy last year, based upon a 2009 U.S. Census.

The downturn that began in 2007 has led to an increased number of bankruptcies. The decrease in home equity made people feel less wealthy and they are more apt to file bankruptcy when the credit card debt seems overwhelming. No longer is equity available in homes to tap in an effort to pay down unsecured debt such as credit cards. Realizing this, many people have come to the conclusion that bankruptcy is their way out. Also Americans are coming to realize that the social stigma of filing bankruptcy has nearly disappeared.

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A January 11, 2011 opinion by the U.S. Supreme Court is expected to drastically increase potential disposable income in Chapter 7 and 13 bankruptcy cases in Tampa, Florida. This may cause someone who previously qualified for a Chapter 7 bankruptcy not to qualify, or to increase the Chapter 13 plan payment by $500.

You see prior to Ransom v. FIA Card Services, N.A., our local (often considered debtor friendly) Tampa Division would generally allow a $496 ownership credit toward a vehicle (two credits were allowed if debtors were married or had reason for an additional vehicle). This $496 credit would be allowed even if the car payment was less than $496 or if there was no car payment and it was owned free and clear. A debtor only needed to own or lease a vehicle to claim the ownership credit. A separate credit is used for vehicle operating expenses. The reasoning in the Tampa Bay area was in part if the debtor was driving an older paid off vehicle, at some point during a 3-5 year plan the debtor would have to purchase a replacement vehicle. Allowing the credit would permit the debtor to both save some money for the down payment as well as afford the payment when the replacement vehicle was purchased.

Following the 8-1 decision in Ransom, our local Chapter 13 Trustees and Judges can no longer allow a debtor to reduce disposable monthly income (DMI) by claiming a vehicle ownership expense when the debtor has no associated loan or lease payment for the vehicle. In some other areas of Florida or elsewhere around the country, debtors already were not allowed to claim the expense, so this won’t have any effect on them. But here in Tampa, this is a major disappointment.

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Contrary to popular opinion, a bankruptcy debtor does not have to give up his or her vehicle immediately upon filing bankruptcy.

First, many debtors choose to keep their vehicles and can do so as long as they continue to make the regular monthly payment and sign a reaffirmation agreement to repay the debt.

Second, free and clear vehicles can be retained provided the values of the vehicles are within the permitted exemptions or provisions to pay to keep them is set forth in the Chapter 13 Plan.

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It was reported in the Miami Herald recently that a former employee of a foreclosure mill law firm in Tampa Florida sued this week for overtime violations when she and others were forced to work “off the clock”. Florida Default Law Group allowed for five hours of overtime per week, but to keep up with the flood of foreclosure cases, Denise Vasquez alleges that she was routinely required to work even more hours without the federally mandated time and a half required by the (FLSA). The case was initially filed in Hillsborough County but was transferred to federal court under the FLSA. Florida Default Law Group remains under investigation by the state attorney general’s office for filing misleading documents in foreclosure cases. Another foreclosure mill law firm with over 1000 employees, Law Offices of David J. Stern, P.A., has practically shut down due in large part to the depositions of employees and other information gleaned in the pending attorney general investigation and the pulling of files by Fannie Mae and other major lenders or servicers.

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Our neighbors are considering buying a condominium in Tampa that was foreclosed by Wells Fargo (owned by Freddie Mac) and noticed two strange things in the paperwork this weekend. First, Freddie Mac is only offering insurable title not marketable title and they wanted to use their own title agent.

Fortunately, our neighbors were smart enough to notice the distinction. First, the possibility of fraud in the foreclosure or anything else wrong with the foreclosure appear to have been excluded from the insurance coverage. So if the prior homeowner comes forth and says I didn’t have notice of the foreclosure because I wasn’t properly served (this happens all the time) or a faulty affidavit or assignment was submitted in the foreclosure litigation to support the plaintiff’s claim that it owned or held the note (also a common occurrence), the homeowner can have the foreclosure sale reversed. Where does this leave the new buyer? Well they would have a claim for the failure of Freddie to provide good and clear title — or would they? With an insurance exclusion, depending upon how it is written, this could be a major dilemma.

Second, Freddie specifically noted that the purchaser was responsible for any unpaid homeowners association expenses. In Florida, there is Florida Statute Section 718.116 that provides that upon foreclosure, the plaintiff is required to pay the past one year of unpaid condominium association dues or 1% of the original principal balance whichever is less. (This is not necessarily true for all homeowners associations). If the plaintiff lienholder fails to do so, are all the delinquent assessments plus attorney’s fees, costs and interest due and owing, perhaps going back years? I wonder, how often does the bank or mortgage servicer actually make this payment by the thirty day deadline? These are the same parties that cannot look at mortgage modification paperwork within the first 30-90 days of submission because they are so overwhelmed.

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Retail sales are up 7.9% from December 2009 to December 2010. Although retail sales increased only .6% in December from November and were lower than expected, retail sales are now above the pre-recession peak in November 2007. Initially this appears good right? Bankruptcy rates in Florida and elsewhere should start to decline as consumers spend more and more people get back to work.

Not so fast. Much of these gains were in energy and food prices. Furniture and home furnishings rose a mere 2.3% year over year. Electronics rose only 2.6% year over year. Clothing sales will almost certainly rise significantly during this upcoming year but not due to an increase of demand, but rather due to cotton prices being in the stratosphere.

What does this mean for the average Floridian consumer? Well the middle class is being squeezed even more with declining wages and increasing costs of living. This leads to more debt to service when paychecks aren’t enough to pay the bills any more. Chapter 7 or 13 bankruptcy is no longer reserved for the divorced, injured, ill or unemployed. Now increasing numbers are filing bankruptcy when they just can’t pay the bills like in the old days.

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telephone.jpgI don’t know about you, but I always have my cell phone with me. While fortunately I do not have debt collectors calling me on my cell phone, a lot of my clients here in the Tampa Bay area are troubled by this every day. Many report receiving several calls per day from the same debt collector. Come on, if a person doesn’t have the money in the morning, are they really going to have it in the afternoon, or even an hour later? Realistically, these calls are meant to do one thing: harass you into paying the debt.

Collectors know this – that’s why they call our cell phones.

Is it legal for collectors to call our cell phones?

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house with foreclosure tape.jpgTwo banks couldn’t prove they owned the mortgages in Massachusetts and they lost a pivotal case on January 7, 2011. This was a Supreme Court decision following an appeal by the banks when they lost at trial earlier this year. The banks probably regret their appeal of a limited land court’s decision which has now gone viral and has even hit the banks stock prices on Friday. The U.S. Bank v. Ibanez decision is the first state supreme court to weigh in on this issue involving securitized trusts.

What does this decision do for Florida homeowners facing foreclosure? Well Massachusetts is a title theory state while Florida is a lien theory state for one thing. One of the key points of the decision was that a mortgage could be bifurcated or separated from the note due to a 1800s decision in Massachusetts. Florida case law provides that a mortgage follows the note. Therefore no bifurcation would occur. However, if the note is lost as is often the case, and the banks cannot show that the mortgages were properly transferred into the securitized trust, that’s where Ibanez will count.

In Ibanez, U.S. Bank initiated the foreclosure proceeding before it possessed a legally effective mortgage assignment. This happens regularly in Florida. Often foreclosure defense attorneys in Florida are faced with trying to determine when notes and mortgages were actually transferred to the plaintiff bank. The banks present undated endorsements of notes which are merely stamps by an employee who often doesn’t review what they are signing or stamping. Assignments are dated retroactively to try and cure the problem. Numerous employees have testified in countless depositions that they do not review any records prior to executing assignments.

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