Legal Toolkit Pennsylvania Bankruptcy, Debt and Consumer Law

What to Know About Bankruptcy, Debt and Consumer Law

a

Debt Collection

The Fair Debt Collection Practices Act (often called the "FDCPA") gives you specific legal rights to sue debt collectors who unlawfully threaten, berate, intimidate or harass you; call during odd hours, make false representations about the debt or their intentions, or otherwise act in ways proscribed by the act. False statements include threatening to take action such as contacting the police when they are unable to do so. A debt collector can not communicate with a consumer in connection with the collection of any debt at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication. No employer enjoys the thought of paying you to sit and take calls about your overdue debts all day, so this type of action is clearly prohibited. The FDCPA requires that within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall (unless already provided in the initial contact), send the consumer a written notice containing - (1)the amount of the debt; (2)the name of the creditor to whom the debt is owed; (3)a statement that unless the consumer, within 30 days after the receipt of the notice disputes the validity of the debt or any portion thereof, the debt will be assumed to be valid by the debt collector; and (4)a statement that if the consumer notifies the debt collector in writing within the 30 day period that the debt is disputed, the debt collector will obtain verification of the debt. This basically means that if you don't remember a debt, you have the right to ask what it's about and get answers to those questions. In addition to this, many states, including Pennsylvania, have statutes of limitation which apply to lawsuits to collect a debt. If the debt is very old it would be barred. HOWEVER, if a collection agent calls you regarding an old debt that is barred by the statute of limitations and you VOLUNTARILY agree to begin making payments - the person holding the debt may now sue you for failure to make payment on this new agreement. Your agreeing to make payments gives them a second bite at the apple.NOTE: Pennsylvania DOES NOT allow wage garnishment except in the case of child support or tax debt.

b

Bankruptcy

is the process by which federal bankruptcy courts help consumers and businesses in financial trouble to eliminate some debts or repay them under the protection of bankruptcy courts. Certain debts cannot be discharged under bankruptcy and these usually include spousal support, child support, tax debts, and educational loans. The two most common kinds of consumer bankruptcy are Chapter 7and Chapter 13. Bankruptcy laws changed significantly in October 2006, requiring consumer debt education and creating very specific rules about eligibility for each kind of bankruptcy, mostly related to the level of disposable income (after certain allowed expenses) according to a "means test".

  1. Chapter 7 bankruptcy is also known as “liquidation” bankruptcy because non-exempt property or assets will be sold (liquidated) to pay off debts. Chapter 7 erases most or all of unsecured debt (debt for which collateral hasn’t been pledged). Exempt property like clothing, cars, a home, and furniture, has a certain monetary allowance assigned to it, allowing the filer to receive back some of the value of those items and make a fresh start after liquidation. In , for example, the exemption amount for a car is $1,000 and a residence is $5,000. A consumer debt attorney can advise what items may be claimed as being exempt, what the exemption amounts are for those items, and what property, if any, may be kept. In addition to other requirements, Chapter 7 requires, for consumers, that the filer(s) have less income than the median family income per family size, per state, according to the Census (see "Means Test B22A in "Where to Read More"). Filers not eligible for Chapter 7 can usually file for a Chapter 13 bankruptcy.
  2. Chapter 13 bankruptcy is also known as “wage earner” plan because the debtor has been determined to have enough regular income to pay off some portion of their debts over the course of 3-5 years. In Chapter 13, loans for cars and homes can be maintained to avoid foreclosure or repossession and co-signers on previous debts may be protected. There are limits to the amount of debt that can be filed under Chapter 13; secured debts must be less than $922,975 and unsecured debts must be less than $307,675.
  3. Chapter 11 and Chapter 12are less common to consumers. Chapter 11 is typically for businesses or individuals who have debts that exceed the Chapter 13 limits or who own substantial non-exempt assets. Chapter 12 is much like Chapter 13 except that it applies to those whose debts arise mostly (80%) from the operation of a family farm.
  4. Chapter 11 and Chapter 12 are less common to consumers. Chapter 11 is typically for businesses or individuals who have debts that exceed the Chapter 13 limits or who own substantial non-exempt assets. Chapter 12 is much like Chapter 13 except that it applies to those whose debts arise mostly (80%) from the operation of a family farm.

c

Identity Theft

Identity theft occurs when someone obtains and/or uses your name, Social Security number, credit card number or some other piece of your personal information to apply for a credit card, make unauthorized purchases, gain access to your bank accounts or obtain loans under your name. If you suspect identity theft, contact your police department immediately and/or see "What to Do" or visit the Attorney General or Federal Trade Commission links in "Where to Read More".NEVER give anyone your bank account information. Not only does this put you at risk for identity theft, it also gives creditorsaccess to personal banking information which may work to your disadvantage later on.

d

Consumer Problems

The Federal Trade Commission (FTC) and Better Business Bureaus (BBB) investigate consumer fraud and link to agencies that report trends and tips about recent national fraudulent activities. Consumer Law lawyers specialize in faulty consumer product issues. See "Where to Read More" for links to FTC or BBB.

e

Credit Report Problems

Be very cautious about hiring a Credit Repair Agency to "fix your credit" with big promises of glowing credit reports in your future. No one can legally remove accurate and timely negative information from a credit report but the law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies and requires that the 3 major credit reporting agencies provide consumers with a free copy of their credit report once every 12 months. See the Federal Trade Commission Credit Report and Major Credit Report agencies link in "Where to Read More".

f

Defective Products

Stores do NOT have to make refunds, take returns, or offer exchanges even if you have a receipt. The only exception is for items that misrepresneted or defective at the time of purchase. Stores in Pennsylvania are required to clearly post their return policy AND follow that policy.

g

Lemon Law

The Pennsylvania Lemon Law DOES NOT APPLY TO USED CARS. Rather the law applies to any new vehicle purchased and registered in Pennsylvania for personal or family use and designed to transport up to 15 persons. Motorcycles, motorhomes and off-road vehicles are not included. Under the law, the manufacturer must, at no cost to the purchaser, repair or correct any defect which substantially impairs the use, value or safety of the vehicle and which occurs within one year after delivery, or 12,000 miles of use, or the term of the manufacturer's express warranty, whichever comes first. If the defect can not be repaired after three attempts, or if the vehicle is out of service for a total of 30 calendar days for repair, generally, you may be eligible for a replacement vehicle or the refund of the purchase price, less a limited allowance for use.