NACBA Member Joshua Cohen was featured on Fox Business “The Willis Report.”
Attorney Cohen weighed-in on “More Social Security benefits getting docked for student loan debt?”
Watch Clip: Fox Business The Willis Report with Joshua Cohen
consumers
Student Loan Debt Lasts a Lifetime
NACBA Response by President Ed Boltz to U.S. News Article “Debunking the Student Loan Bankruptcy Myth”
To the Editor:
More proof that if it sounds too good to be true, it usually is: Contrary to what you may read, there are not “a lot” of instances in which students who are savvy enough to ask to discharge their student loan debts are allowed to do so. (“Debunking the Student Loan Bankruptcy Myth,” August 13, 2014)
In reality, the United States is crippled with what has been termed a “student loan debt bomb.” Americans have accumulated more than $1.2 trillion in student loan debt, exceeding even the level of credit card debt in our nation. Because federal law treats student debt as non-dischargeable in bankruptcy proceedings, borrowers can be burdened with this debt for a lifetime even if they are unable to repay.
Federal law does provide that bankruptcy discharge is available for student loans in cases of “undue hardship.” But there’s a big gap between what is theoretically possible and what happens in the real world. The path to an undue hardship discharge is often blocked by U.S. Department of Education contractors, which aggressively challenge debtors’ efforts to show undue hardship. Too often, what we see in bankruptcy courts is federal education contractors using their legal muscle and ability to drag things out in order to crush hardship cases.
The U.S. Department of Education needs to take charge of the situation and make it clear that the over-the-top hardball tactics of its contractors are out of line. Students, parents, educators, lawmakers and other concerned citizens should encourage Congress to restore meaningful and workable bankruptcy protections for student loans, so that those in real need are able to get a fresh start, rather than being devastated for life by insurmountable student loan debt.
Edward Boltz
President, National Association of Consumer Bankruptcy Attorneys
Raleigh, North Carolina
Bankruptcy Briefs 8/26/14
Bankruptcy Declared in “The Office”
As you’ll see from the clip below, one cannot just “declare bankruptcy” by shouting from the rooftops. On a nationally televised episode of The Office, Michael Scott (Steve Carell) was given this advice by his staff accountants Oscar Martinez (Oscar Nunez). However, Michael received this advice only after announcing to all his co-workers his intent to “declare bankruptcy.” Individuals filing for bankruptcy typically aren’t required to disclose their intent to file or make a public announcement concerning their bankruptcy. (some exceptions to this may exist)
Corporations and partnerships must have an attorney to file a bankruptcy case. Individuals, however, may represent themselves in federal bankruptcy court. While individuals can file a bankruptcy case without an attorney or “pro se,” it is extremely difficult to do it successfully. This is just one of the reasons why the National Association of Consumer Bankruptcy Attorneys (NACBA) exists.
NACBA is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has more than 4,000 members located in all 50 states and Puerto Rico.
“Pro se, NO WAY,” especially not when it comes to increasing your success rate of discharging many of your financial stress points. Declaring for bankruptcy isn’t quite that simple! Get the facts and find an attorney via the NACBA Attorney Finder.
Do not follow Michael Scott’s lead, declare bankruptcy only after having secured legal representation by a NACBA member attorney.
NACBA Member Profile: Greta LaMountain Biagi
Based on random sampling of NACBA’s membership, the Member Profile strives to answer the question: Who are Consumer Bankruptcy Attorneys? It looks at a variety of economic and demographic characteristics, as well as, business practices and “war stories.” NACBA is and always will be your “Your Practice Partner!”
Allow us to introduce, our “Practice Partner,” Attorney Greta LaMountain Biagi of Massachusetts. NACBA Member since June 2006.
Greta LaMountain Biagi was born in western Massachusetts and has spent most of her life in the Amherst area. She spent 13 years in Boston, where she graduated from Berklee College 
of Music with a Bachelor Degree in Vocal Performance in 1994 then received her Law Degree from Boston College Law School in 2003. Between degrees, she worked primarily in business but always kept her community in mind, doing volunteer work for numerous service organizations over the years. Attorney Biagi entered the legal field because she felt driven to work with people and to help them find real solutions to their legal needs. Before starting her own practice, she practiced at two local firms where she was able to hone her varied legal skills under the supervision of numerous experienced mentors.
Whether dealing with business owners or individuals, Attorney Biagi is committed to really listening to her clients and providing a truly individualized approach to each situation as it presents itself. Her emphasis is always on providing a human touch and on giving advice with professionalism and compassion, explaining the legal process and answering questions as understandably as possible.
Attorney Biagi is now a general practitioner with a particular focus on financial matters, including Chapter 7 and 13 bankruptcies and debt negotiation when filing for bankruptcy protection may not be the best option. Her practice also includes residential and commercial real estate transactions, and small business formation and representation. Attorney Biagi has represented business and individual clients in zoning appeals matters and has defended business clients in matters surrounding complaints and prosecutions with state agencies such as the Massachusetts Division of Professional Licensure. She also has appeared regularly in court representing both plaintiffs and defendants in both pre- and post-judgment proceedings and has experience in estate planning, probate and family law.
Attorney Biagi is admitted to practice law in Massachusetts and Connecticut in the State, District and Bankruptcy Courts. She is a member of the Massachusetts Bar Association, Hampshire County Bar Association and National Association of Consumer Bankruptcy (NACBA). She is a member of the Amherst Rotary Club, Amherst Area Chamber of Commerce, and sits on the Board of Directors of Stavros Center for Independent Living, Inc. She has been an MBA panelist discussing Bankruptcy issues and practice, as well as a panelist at Boston College Law School discussing career paths for attorneys and a NACBA panelist discussing social media marketing and practice.
Most challenging case:
During my first couple years of practice, a very difficult bankruptcy client misrepresented numerous assets and lied repeatedly before and after I filed her Chapter 7. I ultimately was forced to move to disappear from the case and she ultimately lost her discharge. I was naive at the time and I learned more from that case than I ever have from any case since. People often do not understand that their lies and omissions can, and very often will, come back to haunt them.
Best advice you received from the national listserv:
Document everything! Confirm all information you receive. Look into your clients’ eyes and assess each situation. Don’t be afraid to walk someone out the door if you do not believe them.
The NACBA benefit you couldn’t live without:
The national listserv, of course! I could not do what I do without the input of other members and without the amazing archives I have saved over the years.
How many years have you been practicing?
I am in my 11th year of practice and am always amazed at how much more there is to learn! The practice of law takes a ton of practice and requires a small enough ego that you are constantly ready to learn the next lesson that comes your way,
Who is your mentor – who do you look up to professionally?
More than anyone, I look up to Ingrid Hillinger, my Contracts Professor at Boston College. She has taught me so much about being human while being a lawyer, being tough but sensitive and caring, learning your trade beyond a textbook understanding, about education and empathy. Ingrid is simply amazing. She happens to be a Bankruptcy professor as well (although I never took Bankruptcy in law school).
What is your favorite part of being a consumer bankruptcy attorney?
I get to make a tangible difference in people’s lives. I can brainstorm, research, and find answers or resolutions to problems, and can almost always help my clients to make a positive change. It works both ways, as I am spared boredom and literally learn from every case.
Name an area of the law that you’d like to learn more about:
I do not have time to focus on these areas right now, but I would like to learn more about tax matters and student loan dischargeability.
Most memorable moment in NACBA:
Presenting on a panel with Jay Fleischman and John Skiba in NYC. I liked doing that.
In another life, you’d be……
An angst-ridden folk chick/singer-songwriter…or a lawyer for The Innocence Project, iIf I did not have a family. But I am so happy to have my family.
For further information on filing bankruptcy, you can contact Greta LaMountain Biagi via her website http://www.biagilaw.com/ or Twitter https://twitter.com/GretaLaMountain
NACBA Member Profile: Gene Melchionne
Based on random sampling of NACBA’s membership, the Member Profile strives to answer the question: Who are Consumer Bankruptcy Attorneys? It looks at a variety of economic and demographic characteristics, as well as, business practices and “war stories.” NACBA is and always will be your “Your Practice Partner!”
Allow us to introduce, our “Practice Partner,” Attorney Gene Melchionne of Connecticut. NACBA Member since December 2002.
Gene Melchionne is a graduate of The University of Connecticut (B.A. 1977) and Drake University School of Law (J.D. 1980) where he received the American Jurisprudence Award for
academic excellence.Since 1980, Mr. Melchionne has focused his practice in the areas of consumer bankruptcy, workouts and foreclosure defense in distressed real estate markets, real estate transactions, condominium law, commercial litigation, business organizations and probate.
Prior to opening his office in 1990, Mr. Melchionne was associated with Grady & Riley in Waterbury, Connecticut and DiPietro, Kantrovitz & Brownstein, P.C. in New Haven, Connecticut. From 1990-1998, Mr. Melchionne was of counsel to Bender & Anderson handling that firm’s complex litigation and trials. In addition to his practice, Mr. Melchionne was an adjunct professor at the American Institute of Banking and Teikyo Post University teaching bankruptcy, real estate, commercial and consumer law. Mr. Melchionne also advised the Corporation Counsel’s office for the City of Waterbury on bankruptcy and foreclosure matters and mentored junior attorneys in that office.
In 2005, Mr. Melchionne was appointed State Chair for the National Association of Consumer Bankruptcy Attorneys (NACBA). He acts as a liaison between the national organization and Connecticut attorneys who are members of the Association. He has fostered education of attorneys in the bankruptcy field and increased access of the public to bankruptcy relief in light of the law passed in 2005. In 2014, Mr. Melchionne was elected to serve on the Board of Directors for the National Association of Consumer Bankruptcy Attorneys.
Most challenging case:
All of them. Every. Single. Fracking. Case. I don’t think there is a thing such as a “simple” case. Every case has some twist or turn, fact pattern or legal issue, that makes it unique and difficult. Clients have different goals in life or philosophies, levels of understanding or education, and personal histories or situations. The very things that keeps no two cases from being the same is the very thing that keeps things fun and challenging. I strive to take different and difficult cases and if there were such a thing as doing only “simple cases”, I think I would get bored and go find something else to do.
Best advice you received from the national listserv:
Don’t take every case that walks in the door. That’s harder to do these days, but it’s really true. There is no success in filing more cases than you can handle, and ultimately, no money in it either. Part of the secret is knowing when NOT to take a case. It’s tempting when filings are down, but everyone has that one case that they regret taking because it never works out. Once I learned to refuse taking cases and focus only on those that presented interesting legal issues or facts, I found that I could be more successful in those cases and happier doing it. The corollary to that is to also make sure you take time for yourself. This is a marathon, not a 50 yard dash. Go hiking or fishing or something. If you don’t decompress, you WILL explode and it WILL be messy.
The NACBA benefit you couldn’t live without:
That’s easy. The listserv(s). When I joined, there was only one listserv and I faithfully read every post until the volume just got to be too much. I skim now, but I have archived every email posted to the listservs since the day I joined, a feat that I believe has only been surpassed by John Colwell. The wealth of knowledge in those posts easily substitutes for any WestLaw or Lexis service and frequently cases are discussed there months before they are available on any other service. A quick search in the archives and I can find just about any answer to any question I might have.
How many years have you been practicing?
Technically 32 years, but I was active in consumer credit for a while prior to passing the bar, first by working in a local credit bureau, and then by paying for law school by repossessing cars and setting them up for auction.
Who is your mentor – who do you look up to professionally?
I don’t have one mentor that I can point to. When I first started practice in credit union collections (hey, we all make mistakes), I learned a lot from the lawyer I worked for about the business of a law practice. When I did condo association work, I depended on those around me to teach me about condominiums. (I swear one day I will write the book, “Condominiums, A Study In Uncooperative Living”.) But since joining NACBA, it has been the stand out members like Cathy Moran, Jay Fleischman, Jill Michaux, Doug Jacobs, John Rao, Henry Sommer, and just about every other member of NACBA that I look to for answers to just about any problem case.
What is your favorite part of being a consumer bankruptcy attorney?
The practice of law is fun. If you are not having fun, then no amount of money makes it worth it. The downsides are steep, but when things go right, there is nothing more fun or challenging than consumer bankruptcy law. You have creditors trying to take your client’s stuff, you have clients who are desperately trying to keep their stuff, you have stuff that ultimately isn’t worth fighting over anyway, you have courts trying to comply with a stupid law and get cases completed and none of them exist to make your life easy. I know I’m deranged, but when that occasional thank you note comes in, it makes it all worthwhile and keeps me going for the next while. Meanwhile, I get to educate consumers about misconceptions in finance and I learn to avoid making the mistakes I see every day. Isn’t life grand?
Name an area of the law that you’d like to learn more about:
Bankruptcy. Anyone who thinks they know it all already is fooling themselves. I learn something new every week even after 32+ years. And just when you think you’ve got it, you can count on Congress or the Supreme Court to change it so you have to relearn what you thought you knew.
Most memorable moment in NACBA:
The first NACBA Convention I attended was in Las Vegas in 2002. Not only had I never been to Vegas before, but I had no idea that there were that many bankruptcy attorneys in the country. Here I was sitting in a room with 800 other attorneys who faced the exact same problems that I did in the same kinds of cases. It was close to a religious experience. In the first day I met the likes of Kurt O’Keefe from Michigan (if you don’t know him, just listen for him during the next NACBA event) and sat down for lunch with Ike Shulman, Henry Sommer, and Billy Brewer not realizing who they were. Everyone was friendly, supportive and knowledgeable and still is. Never before in my then 20 years of legal experience had I ever been to an event that changed my life and my practice like that. If you are not a member of NACBA or let your membership lapse, you are missing out.
In another life, you’d be……
A heavy metal rock musician. This was actually a real choice; go record a demo album with Aerosmith’s producers in Boston or go to law school. Good thing that heavy metal didn’t work out for me given my current crop of hair!
For further information on filing bankruptcy, you can contact Gene Melchionne via his website http://www.ctbankruptcy.com/ or Twitter http://twitter.com/ctbankruptcy
Open Letter to Members of the Pennsylvania Senate (re: Debt-Settlement, SB 622)
Dear Representative:
As Pennsylvania members of the National Association of Consumer Bankruptcy Attorneys (NACBA), we write to express deep concern regarding SB 622, as this legislation would allow debt settlement companies to prey on the most debt-burdened consumers in our state.
Although debt settlement companies market their services as relief, such programs rarely work as promised and involve an inherently problematic business model. SB 622 would eliminate existing protections, while increasing the following harmful debt settlement practices:
- Debt-settlement schemes encourage consumers to default on their debts.[1] Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments. Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the process of debt settlement began: They are deeper in debt, with their credit scores severely harmed.
- Debt settlement often makes a bad problem even worse. When a consumer defaults on his or her debt, the overall debt burden can rise quickly. As accumulating penalties and interest charges inflate the consumer’s debt-load, creditors begin collection efforts and many eventually sue. This is why debt settlement is always a gamble: If any of the creditors refuse to settle, the consumer is left worse off than when they started.
- Even “successful” debt settlements can come with a high price. The few consumers who are successful in debt settlement may find themselves with another unexpected bill: tax liability. Depending on the consumer’s financial condition, the amount of savings realized from debt settlement can be considered taxable income. Credit card companies and other creditors may report a debt reduction to the IRS. Unless the consumer is considered insolvent, the IRS considers it income and the consumer will be on the hook to pay taxes on it.
- The problem is not limited to “bad actors” since the debt-settlement approach itself is flawed. Debt settlement schemes are a trap for most consumers because inherent in the industry’s standard business model is the requirement that clients breach their contractual obligations with creditors.
- Many creditors refuse to work with debt settlers. The knowledge of which creditors do or do not is not known by the consumer at the time of the debt settlement contract.[2] Once defaulted per the debt settlement company’s instructions, consumers face accelerated collection attempts by these creditors. According to the debt settlement industry, lawsuits from creditors are a critical reason why customers become unable to complete the debt settlement program.[3]
Here is one example:
Bankruptcy attorney Cynthia Reed, a NACBA member from Lancaster, Pennsylvania said: “In my 14 years of practicing bankruptcy law in Pennsylvania, I estimate nearly 1 in 3 of my clients present with a debt-settlement experience. Many of these clients come in for an initial bankruptcy consultation after having attempted debt settlement, the client’s story usually starts like this: “Well, I was trying to pay my debts and I signed up with this company . . .” (here the client usually names the company that he/she was using such as Liberty Debt Choice or Freedom Financial Network; the client then goes on to relate how he/she paid hundreds, and in some cases thousands to the settlement company with modest or no results.
During the time that the client is paying the debt settlement company, the client is not paying the creditors, and they are getting harassed by the creditors and the collectors; their credit goes completely in the tank and, in some cases, I’ve had clients who now were being sued. So they come to me, figuring that a bankruptcy is their only option and, by that time, it really IS their only option. I’ve seen people who were paying $800, $900 and more per month with nothing happening. They can’t reach anyone at the debt settlement provider’s office or if they do they’re told they just have to be patient and keep making their payments. So, for a while they do. And still nothing happens. Finally, they come to see me about a bankruptcy. This has become increasingly the case in the past 5 or 6 years, even after the FTC rules banning advance fees.
It’s heartbreaking, because so many people think they’re doing the right thing by trying to pay SOMETHING, and they feel good that they’re getting a handle on their finances, until they realize that they’re deeper in the hole than before. The whole concept of “debt settlement,” at least as it is practiced right now, does little more than hold out false hope to desperate people.
___________________________________________________________
In response to claims made by debt settlement companies regarding bankruptcy and about the effects of the recent changes to the FTC’s (Federal Trade Commission) rules that prohibit charging advance fees, we wish to note the following points:
- Debt settlement is not a safe alternative to bankruptcy. Many debt settlement clients end up filing for bankruptcy anyway, after debt settlement fails. Additionally, debt settlement does not provide the same protection to creditors or consumers which bankruptcy provides. For example, similar to Chapter 13 bankruptcy, debt settlement attempts to settle debts at a reduced rate—except there is no court-approval, no assurance of fairness to other creditors, and no right for creditors to be heard. Additionally, bankruptcy prevents the cascade of creditor lawsuits that is common in debt settlement since consumers in bankruptcy are protected by a statutorily mandated automatic stay of other lawsuits.
- Debt settlement is not a safe alternative to legal representation regarding defenses and rights against creditors. Debt settlement programs often suggest that consumers should use the Fair Debt Collection Practices Act (“FDCPA”), the Fair Credit Reporting Act (“FCRA”) and the Unfair Trade Practices and Consumer Protection Laws, to forestall collection and build counterclaims against creditors. Many even provide forms for consumers to use to this effect. However, the use of these laws often becomes fraudulent and abusive. Further, debt settlement programs are unable to advise consumers whether debts are legally collectible for reasons including the Statute of Limitations, identity theft, or other deficiencies, instead settling claims that the consumer may have no obligation to pay.
- While the FTC Rule effectively addressed some abuses, it has not resolved all of them. Since debt settlement programs can take three years or longer to complete and only three years have passed since this rule change took effect, it is unknown whether the advance fee ban will result in better success rates. Debt settlement companies have not yet publicly released completion rates, or even partial completion rates, of consumers enrolled over this period. Moreover, recent data from Colorado’s Attorney General reveal little change in that state upon implementation of the advance fee ban.[4]
- Debt settlement programs routinely provide legal advice. Whether provided online, in brochures, or through television and radio advertising, materials from debt settlement programs routinely provide consumers with information regarding their rights under a variety of state and federal laws, including bankruptcy, the FDCPA, FCRA and the Unfair Trade Practices and Consumer Protection Laws. This information is often misleading or inaccurate (skewing against consumers seeking forms of assistance other than debt settlement), although even when this advice is accurate, it can constitute the unauthorized practice of law. Further, it is difficult to understand how a debt settlement program can adequately advise consumers regarding their rights and options under state and federal law, including defenses to invalid debts, debts barred from collection under the Statute of Limitation, bankruptcy options, etc., without illegally giving legal advice. SB 622 frees debt settlement programs from oversight by the Pennsylvania Bar and allows non-attorneys to dispense often inaccurate legal advice, without the client protections under which the fully regulated and supervised legal community provides.
There is growing consensus that debt settlement is a problematic manner of providing debt relief. For example, The Better Business Bureau has designated debt settlement as an “inherently problematic business.”[5] Similarly, the New York City Department of Consumer Affairs called debt settlement “the single greatest consumer fraud of the year.”6 SB 622 is troubling because it creates financial incentives for companies to encourage consumers to stop paying their debts, allows for unlimited fees regardless of whether any savings are actually achieved, provides no standards to ensure that debt settlement is suitable for a particular consumer, and does nothing to ensure the consumer will not be worse off in light of the practices authorized by the bill.
For these reasons, we urge you to oppose SB 622.
Thank you for your consideration of these concerns. Please let us know if we can provide any additional information.
Sincerely,
Henry Sommer
NACBA President Emeritus
Philadelphia, Pennsylvania
___________________________________________________________
[1]The General Accountability Office investigated abuses in the debt settlement industry using “mystery shoppers,” who called debt settlement companies posing clients. The GAO reported, “Representatives of nearly all the companies we called—17 out of 20—advised us to stop paying our creditors,” These included 5 members of The Association of Settlement Companies (now doing business as American Fair Credit Council)—purportedly representing the “better” debt settlement companies. Debt Settlement: Fraudulent, Abusive, and Deceptive Practices Pose Risk to Consumers, U.S. Gov’t Accountability Office Rep. No. GAO-10-593T (Apr. 22, 2010) at 9 [hereinafter U.S. GAO Report], available at http://www.gao.gov/new.items/d10593t.pdf.
[2] Inside ARM Debt Settlement Survey: How Creditors and Collectors Utilize the Debt Settlement Industry to Increase Collections, INSIDEARM.COM (Jan. 2013) (finding that only one-half of collectors (including credit card companies, debt collectors and debt buyers) were willing to engage with debt settlement companies). http://www.insidearm.com/freemiums/debt-settlement-industry-collections/
[3] “One of the most critical factors in keeping consumers in debt settlement programs is the willingness of the consumer’s creditors to forebear from pursuing collections efforts through lawsuits,” according to Freedom Debt Relief and AFCC. See AFCC is “American Fair Credit Council,” the industry trade association formerly known as TASC. April 28, 2010 letter from Robert Linderman, General Counsel of Freedom Debt Relief and Vice Chairman of the Board of The Association of Debt Settlement Companies (now doing business as American Fair Credit Council), to David C. Vladeck, Director, Federal Trade Commission Bureau of Consumer Protection, at 5 n. 9 (emphasis supplied).
[4] Data from Colorado show that nearly 55% of consumers who enrolled after the advance fee ban had already terminated from the program (thereby not succeeding) within the first two years (industry claims that programs last 3-4 years).
[5] The Better Business Bureau provided data to State attorneys general showing that since 2007, debt settlement and debt negotiation companies have annually generated the most complaints received by the Bureau. See Comments of the National Association of Attorneys General to Federal Trade Commission re Telemarketing Sales Rule – Debt Relief Amendments, Matter No. R411001 at n.5 and text (Oct. 23, 2009, available at http://www.ftc.gov/os/comments/tsrdebtrelief/543670-00192.pdf.
6 See “Department of Consumer Affairs Declares Debt Settlement Top Fraud of the Year”, available at http://www.nyc.gov/html/dca/html/pr2011/pr_030911.shtml
NACBA Now 