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Illinois commercial debt collection attorney

As someone from a credit union, bank, or other financial institution, among other organizations, who deal with debt collection activities every day, sooner or later, you will have to deal with Bitcoin and other cryptocurrencies, if you have not already and whether you want to or not. This is because, over the last several years, cryptocurrency has made tremendous strides in the following ways:

  • Multibillion-dollar investors from leading companies have been investing in cryptocurrencies like Bitcoin to get ahead of the trend, increasing its value and popularity amongst investors.

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Illinois creditor and lender bankruptcy attorney

You might not be aware of it, but one of President Biden’s campaign promises was to make credit reporting fairer and more accurate so that everyone across the country, no matter their race or socioeconomic status, can have more equal and much better opportunities to access credit cards, loans, mortgages, and other financial offerings. As a representative from an auto lender, equipment lender, truck lender, credit union, bank, or other financial institution, you might want to learn more about the possibilities that the Biden Administration is open to with regards to credit reporting reform. Here are some new ideas that you might see over the next four years. Keep them in mind during your dealings with debt collection activities, including bankruptcies

3 Potential Changes to Credit Reporting That You Should Know About

While there are many reforms the Biden Administration might consider in the future for credit scoring and reporting, these are some of the more substantial changes currently under consideration:

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Illinois debt collection attorney

As a financial professional, be it as a representative from a credit union, bankauto lendertruck lenderequipment lender, or other financial institution, it is important to work with an attorney who acts as an official litigator. Together, you might think you have everything taken care of when it comes time to investigate the finances of a debtor you suspect might be committing fraud or other wrongdoing. However, with regards to any number of debt collection activities, including such complicated legal processes as bankruptcy, you could also benefit from the assistance of a forensic accountant. 

What Does a Forensic Accountant Do?

Most of the time people assume an accountant does your taxes and that is about it, but as with most fields, there are plenty of subsets. Forensic accountants study the numbers and figures in financial and legal documents, intensively reviewing them to find discrepancies within the recordkeeping as to draw conclusions about potential wrongdoing. They can also confirm if certain errors were made, or support arguments to the contrary. 

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Illinois debt collection attorney mortgage lender

Joseph R. Biden, Jr. was inaugurated as the 46th President of the United States of America on January 20, 2021. With barely enough time to celebrate this major achievement, he rushed to work and signed off on several executive orders and actions on his first day in office. One such executive order included extensions on the moratorium for mortgage foreclosures and rental evictions. Here are the details on this latest executive order, particularly helpful if you are a mortgage lender or servicer attempting to collect on the homeowners’ debts.

Extensions on Mortgage Foreclosure Moratoriums and Forbearance

President Biden issued several executive orders dealing with a wide variety of topics, including climate change, student loan debt, COVID-19 relief and regulations, and immigration. Of particular interest to mortgage lenders is the moratorium extension; request for even further extensions in the future; and updates to the newest forbearance guidelines. With regards to the moratorium, the new order mandates that:

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Illinois wage deduction attorney

When it comes to wage garnishment, if you are tasked with collecting debt on behalf of a bank, credit union, or finance company, seizing funds from a debtor’s paycheck through garnishment or wage deductions is often a last-resort strategy for you to use in recouping your organization’s funds. With that being said, if you are faced with the need to garnish a debtor’s paycheck or other earnings, you should know just what types of funds or income can be garnished in Illinois. 

What Can Be Garnished

In general, according to Title III of the Consumer Credit Protection Act (CCPA), a person’s earnings can be garnished to collect on debts. Per the CCPA, earnings is defined as:

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Illinois debt collection attorney foreclosure

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.

Advice to Mortgage Lenders When Prepping for Foreclosure During the Pandemic 

With the vaccines only starting to be administered and with the latest COVID-19 economic relief bill signed into law nine months after the CARES Act, you cannot expect things to get back to normal immediately. Therefore, the negative impact of COVID-19 on the economy, including housing, will persist far into 2021. Due to this, you need to be prepared for continual increases in foreclosures, including from residents of normally good standing with your mortgage lending or servicing company. To better prepare for an influx of foreclosures in the new year, consider the following tips:

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Chicago bankruptcy attorney credit union

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.

3 Keys to Successful Credit Union Debt Collection 

While there are many ways you can pursue debt collection successfully, recouping as much of the lost funds as possible, that are similar to banks and other related institutions, there are certain approaches that credit unions should keep in mind when pursuing collection efforts against one of their members, such as the following:

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Chicago debt collection attorney

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. 

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Chicago debt collection attorney detinue

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. 

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Chicago Mortgage Loan Servicer AttorneysWith 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. 

Mortgage Lender Responsibilities Per the CARES Act, Then and Now

Provided the mortgage being serviced is federally backed, mortgage lenders and servicers are required by law at this time to offer the following forbearance policies to eligible homeowners:

  • The CARES Act enables forbearance of mortgage payments for up to six months in which interest accrues and the payments are only postponed.
  • The lenders have the right to extend the forbearance another six months for a total of one year of a forbearance in mortgage payments due to the COVID-19 pandemic.
  • During these forbearances, servicers cannot charge fees or interest beyond what would have been provided for with the homeowners’ usual monthly on-time mortgage payments.
  • An important new interpretation of the CARES Act from federal regulators confirms that servicers cannot require repayment of the missed mortgage payments in one lump sum at the end of the forbearance.
  • When the forbearance period ends, the lender will work with the homeowner to devise a loan modification, workout, or other plan that will allow them to pay back the missed payments over time.

Why Expanding COVID-19 Forbearance Policies Might Be a Good Idea

According to the U.S. House Committee on Financial Services, nearly 70% of all homeowners have federally-backed loans that qualify for these forbearance policies, which means you as a lender technically are not required by law to offer it to all your borrowers. However, despite this, you might want to consider the expansion of your COVID-19 forbearance policy to all homeowners and not just those with federally backed loans. Reasons to do this include:

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Chicago debt collection attorneyAs 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.  

Regulatory Issues

While to many consumers, these cash-advance apps might seem like a brave new world of brand-new trending apps that could really save them from some tough times, many financial experts argue that these apps are really payday lenders disguised as newfangled technology. The reason? Because many of them collect “optional” tips on every payday advance, many of which amount to interest rates comparable to standard (and high) payday-loan rates. In many cases, these apps are offered in states where payday loans of certain high interest rates are outlawed, or payday loans are entirely against the law. Such regulations have already taken their toll on the app Earnin, which was forced to disable the “tip” option a year ago in New York.  

How Cash Advance Apps Attract Borrowers and Ensure Repayment

These apps stay afloat for four primary reasons:

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Chicago debt collection attorneysAccording 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:

  • Many stores where consumers might use their cards were closed for weeks or months because of state mandates.
  • Consumers are staying at home more often, which means they spend less on travel and dining.
  • Most consumers received stimulus payments from the federal government, which some used to pay down their credit card balance.

How Credit Card Companies Have Adjusted

Credit card companies have also responded to the economic effects of the pandemic to protect themselves and help their clients. Many companies are working with existing customers who are facing an unexpected economic hardship that makes it harder for them to make monthly payments. Companies can provide relief by modifying the debt agreement to reduce monthly payments and interest rates or to waive late fees.

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Chicago debt collection attorney repossession

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:

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Chicago creditors rights attorneyIn 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:

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Chicago debt collection attorneysWith 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.

New Ways to Facilitate Collections

There are three main ways that banks are using technology to help with debt collection:

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What to Do If Your Debtor is Judgment ProofIn most cases, receiving a court judgment against a debtor gives a creditor a clear path towards debt collection. The judgment allows you to seize assets and garnish wages until you have collected what is owed to you. However, a court may still stop your collection efforts if it determines that the debtor is “judgment proof.” Also known as “collection proof,” a judgment-proof debtor is someone who lacks the minimum income or non-exempt assets to collect from. This person could be without a job or meaningful assets and surviving on public benefits. What can you do if a debtor is judgment proof?

Understanding What Judgment-Proof Means

Federal and state laws provide exemptions for debtors who are facing debt collection or have filed for bankruptcy. In Illinois, these exemptions include:

  • A homestead exemption for as much as $15,000 of equity in the home, or $30,000 if owned by a married couple
  • Wage protection if the debtor’s weekly income after taxes is less than 45 times the Illinois minimum wage
  • Protection for public assistance, retirement benefits, injury awards, and unemployment insurance
  • An exemption for one motor vehicle whose interest is not greater than $2,400
  • A $4,000 wild card exemption that can be used on its own or combined with other exemptions

A person is deemed to be judgment proof when they have no income or assets available after these exemptions.

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Four Keys to a Strong Guarantee in a Loan ContractA loan contract can have more than one party who is liable for the debt. For instance, a loan may have a guarantee, in which a third party called a guarantor promises to repay the debt in the event that the principal debtor defaults. A guarantor can be an individual, bank, or other financial institution and can agree to put up assets as collateral for the debt. For creditors, a guaranteed debt provides security if lending to someone who has a poor or unproven credit history. However, the guarantor could try to get out of their liability by finding a weakness in the contract. Here are four tips for creating a strong guarantee in your debt contract:

  1. Get the Guarantee in Writing: It may seem obvious, but it is crucial that the guarantee is a written agreement. Courts typically do not recognize oral agreements for guarantees, and even if they did, an oral agreement is an unreliable way to set strict terms for the guarantee.
  2. Use Clear Terms and Conditions in the Contract: The guarantee in the contract should state when the guarantor becomes responsible for the debt and how much they must pay. For instance, you could have an unconditional guarantee that requires the guarantor to pay regardless of the reason for the default or a guarantee that is conditional on actions such as attempting to collect from the principal debtor before collecting from the guarantor. 
  3. Include Terms Giving Consent to Modify the Agreement: One argument the guarantors have used against creditors is that the guarantor was unaware of a modification to the loan agreement that significantly increased their burden if they became liable for the debt. You can protect yourself against this argument by including a section in the contract in which the guarantor consents to pay the debt regardless of modifications.
  4. Check on the Guarantor: Having a guarantor for a debt does you little good if that person has a poor credit history. Do a background check on the guarantor just as you would with the principal debtor. Make sure they have the income or assets to pay if needed and a history of making payments on time.

Contact a Chicago Creditor’s Rights Attorney

When a debtor or guarantor balks at repaying a defaulted debt, you will rely on the strength of your contract and your legal team to protect your financial interests. An Illinois creditor’s rights lawyer at Walinski & Associates, P.C., knows the tactics that debtors use to avoid payment and how to respond. To schedule a consultation, call 312-704-0771.

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Illinois Mortgage Delinquencies May Rise Due to RecessionLawmakers in the U.S. recognized from the beginning of the COVID-19 crisis that homeowners would need help with mortgage payments in order to avoid a surge in mortgage foreclosures. The Coronavirus Aid, Relief, and Economic Security Act had several provisions for homeowners, including:

  • A moratorium on foreclosure of single-family homes with federally backed mortgages, which the Federal Housing Finance Agency recently extended until at least Aug. 31
  • A mandate that forbearance be provided to homeowners, regardless of their delinquency status
  • The loosening of restrictions on modifying loans

Illinois has issued executive orders that put a moratorium on evictions, though it also said that homeowners are still responsible for making mortgage payments. Housing market analysts are concerned that the downturn in the economy could lead to the state’s worst mortgage delinquency rate since the Great Recession of a decade ago.

Obstacles Facing Mortgage Payments

More than one million Illinois residents lost their jobs due to businesses being forced to close or reduce staff in response to the coronavirus outbreak. Even with unemployment benefits and stimulus payments from the federal government, many homeowners have tighter budgets with which to make mortgage payments. In some cases, homeowners may be forced to choose between staying current on their mortgage payments and paying for other necessary expenses.

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How to Collect from a Deceased Debtor’s EstateIt is common for a person to die before they are able to pay off all of their debts. As a creditor, you have the right to seek repayment for debts even after a debtor has died. If someone cosigned on the debt, your collection efforts can shift towards the living party. Otherwise, you will be collecting the debt from the deceased party’s estate. Each state has its own rules for how soon creditors must make claims against the estate and how much of the estate is available to creditors. For creditors operating under Illinois law, here are the answers to three basic questions about retrieving debt from a deceased party:

  1. What Priority Do Creditors Have?: A deceased person’s estate must repay the person’s creditors before it distributes assets to beneficiaries. Illinois exempts certain assets from being collected, such as life insurance and retirement benefits. In the event that the deceased person’s debts are greater than their assets, their assets will be distributed based on the priority of each creditor’s claim.
  2. What Are the Deadlines for Collection?: The deadline for creditors to file a claim against a deceased person’s estate depends on whether the estate is going through the probate process. During probate, the executor of the estate must attempt to contact the deceased party’s creditors by delivering notifications to their addresses and posting an announcement in a local publication. If you are notified directly, you have three months to file a claim against the estate. If you discover the notification in a publication, you have six months to file a claim. Without probate, the executor of the estate is not legally required to contact you, but you can file a claim up to two years after the person’s death.
  3. Who Should You Contact About Collecting the Debt?: In most situations, you need to contact the person who has been designated as the executor of the estate in order to file a claim. The surviving family members of the deceased party do not inherit the debt and are not directly liable for repaying you. The exceptions are if one of the family members cosigned on the debt or if family members received assets from the estate without allowing creditors to file a claim.

Contact an Illinois Debt Collection Attorney

Collecting debt after a person has died is a sensitive issue. You need to be proactive in filing a claim while respecting those who are in mourning. A Chicago debt collection attorney at Walinski & Associates, P.C., can navigate the probate process to help you claim the money that is owed to you. To schedule a consultation, call 312-704-0771.

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Which Types of Federal and State Benefits Are Creditors Not Allowed to Garnish?When all other attempts to collect a debt have been unsuccessful, a creditor may be left with only more drastic measures, such as wage garnishment. You cannot garnish a debtor’s wages until after you have filed a lawsuit against the debtor and the court has found in your favor. With wage garnishment, you can order the debtor’s employer to divert a portion of their paycheck to you in order to repay their debt. You can also freeze the debtor’s bank account in order to garnish money without the debtor being able to withdraw it. However, there are some sources of income that you cannot collect from. For instance, many federal and state benefits are exempt from garnishment.

Which Benefits Are Exempt?

Federal and state laws protect individuals’ benefits from both garnishment and deduction. In Illinois, exempt benefits include:

  • Unemployment compensation and benefits
  • Social Security and Social Security Insurance
  • Public assistance
  • Disability benefits
  • Retirement benefits and pensions
  • Veteran’s benefits
  • Child support and spousal maintenance
  • Awards from personal injury lawsuits

Garnishment is allowed on protected benefits when it applies to certain debts, such as unpaid child support, federal student loans, and income taxes.

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