CONSUMER ISSUESMicah Legal Aid Volunteer Training

What are the Consumer Issues

Collection cases Bankruptcy Car Repossession Utility issues

Collection Cases

Identity Theft Debt Buyers Hospital Collections What is at risk? Is the client judgment

proof?

Identity Theft Issues

Does the client recognize the original creditor?

Did they agree to be responsible for the debt?

If not, they may have a good defense to the case.

Debt Buyers

Is the plaintiff in the case the original creditor?

Or are they a debt buyer? The client may have a defense to a debt buyer case.

If a debt buyer, has the client been sued on this debt before?

Does the client recognize the original creditor, if identified in the complaint?

Hospital Collections

Who is the bill for? The client? A family member?

Did the client have insurance coverage? If so, did they notify the hospital of their

coverage or make a claim with their insurance company?

If not, the client should ask the hospital for an uninsured discount. The client may also qualify for Charity Care if the hospital is a non-profit hospital. They must apply to the hospital for Charity Care.

Judgment Proof

What is at risk? Is the client judgment proof?

What does judgment proof mean? Even if a creditor sues the client and wins, the

creditor will be unable to collect on their judgment if the client is judgment proof.

Judgment Proof Continued

When is a client judgment proof? They earn gross wages of less than:

Their income comes from unemployment Their income comes from social security –

disability or retirement

Judgment Proof Continued

All the client’s assets are exempt from collection: Their home, if they have one, has less than

$15,000 in equity (creditors may still be able to put a lien on the home and seize equity in the future)

Their car, if they have one, is worth less than $2,400, or has less than $2,400 in equity

Their personal property, including money/savings is less than $4,000

Funds in an IRA or a 401(k) or other retirement savings account are exempt from creditors – no maximum

When A Client is Judgment Proof

The client can write letters to debt collection agencies or debt buyers to stop the phone calls under the Fair Debt Collection Practices Act. This does not apply to original creditors, who

can continue collection calls

What if the client is not judgment proof?

Wages can be garnished by judgment creditors at 15% of the client’s gross income.

Only one creditor can garnish at a time.

Bankruptcy may be an option to stop the garnishment if the client only has exempt assets.

Bankruptcy

Two types of bankruptcy cases: Chapter 7 Chapter 13

Clients who are judgment proof do NOT need to file bankruptcy in most circumstances

Chapter 7 bankruptcy

All of client’s debts are discharged Watch for a few exceptions such as:

student loans tax debts Parking tickets Child support

Clients have to give up any non-exempt assets but they do not have to pay back the debts

Can only file once every 8 years

Chapter 7 Bankruptcy

A good option for clients who are being garnished but do not have a lot of assets

Could be an option for clients who are behind on utility bills

Chapter 13 Bankruptcy

Clients keep all of their assets but have to repay at least some part of their debts through monthly payments for 3-5 years

Clients who are behind on mortgages or car notes are usually best candidates for Chapter 13 if they can afford to catch up

Clients whose drivers licenses have been suspended for parking tickets may get their licenses back by filing a Chapter 13 case

Car Repossession

When was the car repossessed? Was the client behind on payments? How much has the client paid on the

loan? How far behind is the client on

payments?

Car Repossession

If the client was not behind on the payments when the car was repossessed- The creditor must send a notice with an

affidavit on which the owner of the car can list any defenses

The owner of the car can send the affidavit by certified mail to the creditor describing her defenses and then the creditor must file an affirmative action before selling the car.

Car Repossession

If the client was behind on the payments when the car was repossessed: A client has two rights to redeem under Illinois law:

1. If a client has paid more than 30% of the total payments due, the client has 21 days to redeem the car after repossession. To redeem the car, the client must pay overdue payments, late charges, and any repossession costs.

2. A client can redeem the car after repossession anytime before it is sold by paying off the loan in full, including fees and expenses.

A Chapter 13 bankruptcy may be an option if the car has not yet been sold and the client can afford to make payments

Car Repossession

If the repossessed car has already been sold, the client may be liable for a deficiency.

If the creditor sues on the deficiency, the client may have a defense or a counterclaim for damages if: The car was not sold in a commercially reasonable

fashion The notice the client received before the sale of

the car was defective The client called to make payment arrangements

and the creditor agreed not to repossess and give the client more time to pay

Utility Issues

Is the client’s utility service on or off? How much does the client owe? Does the client have a shutoff notice? Does the client live in subsidized housing-

do they either live in a building operated by the Chicago Housing Authority or do they have a Section 8 voucher?

Has the client applied for any assistance with the utility bill?

Utility Service is On

If the client’s service is on, but they owe a large amount or they have a shutoff notice, they can: Apply for assistance from CEDA

LIHEAP – a one time grant paid on the client’s utilities in the fall. If a client receives this grant, their gas and electricity cannot be shut off from November 1-April 1. The client may still receive shutoff notices during this time.

PIPP- Percentage Income Payment Plan – The client receives assistance with the bill each month with the goal being that the client pays only 6% of their income per month toward both gas and electric bills. If a client has high bills each month, they may have to pay more

Utility Service is On

Medical Certification: If client is approaching a shutoff date and the client has a medical need for electricity or gas, the client’s doctor can send a letter to the utility company explaining the medical need. The utility company then cannot shut off the client’s utility for 30 days while the client makes payment arrangements. This can be extended an additional 30 days.

If a client lives in subsidized housing, they can lose their subsidized housing if their utilities are off!!

Utility Service is Off

If a client’s utility service is off, the client may be able to get the service back on by: Medical Certification – if it is sent within 14

days of the service being turned off Bankruptcy – if a client files a chapter 7 or

chapter 13 bankruptcy, the utility MUST restore service immediately after the case is filed. The utility can require the client to pay a deposit for future service.

Contact utility – the client can always contact the utility and negotiate a repayment plan which would restore service.