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Recent Blog Posts
How to Manage Preforeclosure in the Age of COVID-19
While the mortgage, rent, and income protections provided for in last spring’s original Coronavirus Aid, Relief, and Economic Security (CARES) Act have long since been exhausted, many states, including Illinois, have continued to offer their own executive orders and legislation to assist residents during this unprecedented time. In addition, many mortgage companies have developed their own programs for homeowners to help them avoid foreclosure, at least for the time being. However, that is not to say if you are looking to eventually collect on the debts owed from these properties that might be in preforeclosure, you should not be prepared to take action. Foreclosure debt collection will be inevitable post-pandemic, despite the latest COVID relief package being signed into law. In that sense, you, as a mortgage lender or servicer who deals with foreclosures, must remain focused on your job, collecting and documenting everything necessary to make the preforeclosure and foreclosure processes go smoothly whenever the time comes.
How Do Credit Unions Deal with Bankruptcy Differently from Banks?
Bankruptcy is a complex process for any financial institution, but for credit unions, in particular, there are some special issues to take into consideration when proceeding with your debt collection efforts. Unlike many banks, auto lenders, truck lenders, equipment lenders, or other financial institutions, credit unions face additional challenges in their recovery efforts due to the nature of their organizations. Here are some tips for how to manage member bankruptcies or other debt collection needs if you work for a credit union.
How Will the Pandemic Affect Consumer Habits on Black Friday?
It is common during the holidays, especially during Black Friday, for consumers to purchase more than they can actually afford; in fact, some of these shoppers are already struggling financially but believe the holiday gives them a great opportunity to max out their credit cards and take out loans for exorbitant holiday gift-giving before they eventually file for bankruptcy. There are ways to contest such holiday bankruptcy fraud, but this year might not be the same due to the pandemic.
How COVID-19 Will Change Black Friday
Numerous retailers are struggling financially as a result of the pandemic due in large part to early stay-at-home orders for all non-essential workers and businesses as well as the economic recession itself. Fortunately, those companies with strong e-commerce skills have been able to offer their products online. The pandemic will change Black Friday in this way—it will further accelerate the trend of people avoiding the in-store rush and simply shopping online instead.
What Are Your Options if a Debtor Hides Collateral from Repossession?
If you work for a bank, credit union, auto lender, truck lender, equipment lender, or other finance company, you are familiar with the way some debtors might refuse to pay their monthly payment for their debt secured by collateral. In those cases, repossession of the collateral is necessary, but sometimes the debtor will hide the car, boat, or other collateral to prevent repossession. If that is the case for you and your organization, consider the actions you can take to recover the property, including legal actions.
When Repossession Fails
Repossession companies are legally permitted to do many things in their pursuit of reclaiming property for creditors, but one thing they cannot do is “breach the peace,” which means they cannot commit crimes like breaking into a property or intimidating creditors in order to retrieve the collateral. This is one of the reasons creditors should be very mindful and discerning when choosing a repossession partner.
Should You Institute a More Expansive COVID-19 Forbearance Policy?
With many reports claiming that the COVID-19 pandemic could continue well into 2021—and some reports even suggesting that it could last into 2022—the economic impact is likely to remain substantial and adverse. Illinois alone approximately has more than a 20 percent unemployment rate since the start of the pandemic. All this job loss and financial strife means more foreclosures, mortgage loan modifications, workouts, and other adjustments to mortgages are bound to occur, at least eventually. With echoes of the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law this past March still being felt today, mortgage lenders and mortgage servicers might be considering their responsibilities at this time in offering new—or extending prior—COVID-19 forbearance plans for their borrowers. Here is an overview for your reference.
What You Should Know About the Rise of Cash-Advance Apps
As the economic repercussions of the COVID-19 pandemic persist across both Illinois and the entire nation, consumers have been looking for new ways to fund their daily expenses from paycheck-to-paycheck. Enter the cash-advance app, clever applications on their smartphones that link to their bank accounts and offer small cash advances each pay period provided the user meets certain requirements. Among them are such apps as Earnin, Dave, Branch, and Brigit, with countless others cropping up every day on your smartphone’s digital marketplaces. With these apps becoming more and more popular, many financiers and finance companies funding such major joint “fintech” ventures might be wondering how they can ensure appropriate debt collection. Overall, though, that might be the least of their worries at this point. Here are a few reasons why.
How Credit Card Companies and Consumers Have Reacted to the COVID-19 Pandemic
According to the August report from the U.S. Federal Reserve, the amount of unpaid credit card debt in the U.S. has been dropping since the start of the COVID-19 pandemic. Outstanding consumer credit card debt in July was reported as $994.7 billion, which is down from $996.8 billion in May and $1.078 trillion in Quarter 1 of 2020. Declining credit card debt is a predictable response to a downturn in the economy. In fact, both consumers and credit card companies have changed their behavior because of the pandemic
Consumers’ Approach to Debt Has Changed
Millions of Americans lost their jobs, were put on leave, or had their hours reduced in response to the COVID-19 outbreak. When consumers are uncertain about their job income, many will become more risk-averse about taking on credit that they may not be able to repay. The pandemic affected the activities of cardholders in several ways:
Why Equipment Lenders Try to Avoid Repossession from Clients
Leasing is a useful way for businesses to acquire equipment if they do not have the money or see the need to purchase the equipment in full. Equipment vendors and leasing companies charge a monthly fee to lend the equipment to the business, sometimes with the option for the business to purchase the equipment at the end of the lease. As with any lease, the lessor must weigh the likelihood that the lessee will be on time with the payments for the duration of the lease. Unfortunately, a business can be unpredictable, and the client may fall behind on their payments despite good credit history. The terms of the lease may give you, as the lessor, the right to repossess the equipment, but repossession is often not the best option.
Problems with Repossession
There are several reasons why you may want to avoid repossessing equipment if a client is not paying their lease:
Understanding the Chapter 7 Bankruptcy Means Test
In general, bankruptcy is an outcome that most creditors want to avoid when dealing with a debtor. If you are an unsecured creditor, the debtor may use bankruptcy discharge to clear their debt while paying you little or none of what they owe. Most consumer debtors file for either Chapter 7 or Chapter 13 bankruptcy, and the chapter they choose may depend on what they qualify for.
A debtor cannot use Chapter 7 bankruptcy if the bankruptcy court deems that they are capable of repaying their debts. One way that a potential bankruptcy filer can determine whether they qualify for Chapter 7 bankruptcy is through the Chapter 7 Bankruptcy Means Test. If the debtor does not pass the test, then Chapter 13 bankruptcy may be their only option.
Chapter 7 vs. Chapter 13
Before explaining the Chapter 7 Means Test, it is helpful to understand the difference between the forms of bankruptcy from a creditor’s perspective:
How Banks Are Using Technology to Help with Debt Collection
With the ways that technology has changed consumer behavior, lenders have been rethinking their approach to debt collection. A room full of people calling delinquent debtors may no longer be the most efficient or effective way to collect debts. Instead, lenders such as banks are using communication technology to more quickly reach clients with a tone that sounds and feels less aggressive.
Efficient debt collection may become a necessity given the current financial status of households and businesses throughout the United States. Many lenders have allowed borrowers to defer payments or use forbearance because of the financial hardship they are suffering during the COVID-19 pandemic. When the deferrals have ended, however, lenders may need to ramp up their debt collection efforts.
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