“Dear Steve,

I am with a debt negotiation company for over a year and i am being sued for one of my debts, the law office that represents the debt informed me that the company I am paying money to never contacted them when I faxed the letter over a month ago.

Now I have been summonsed to court and do not know what to do. I have come up with $4000.00 for a $7000.00 debt but they want $5000.00 and the summons could have been avoided if the debt company contacted them

Lynn”

The Answer:

Dear Lynn,

I’m so sorry that you are having to deal with all of this. It must be very stressful.

I think the first step would be for you to call the debt settlement company you are working with and speak to a human about this. It is quite possible that the letter that you faxed over was never received properly or got caught up in something else.

A good debt settlement company should be able to jump in and assist you with this matter, even at this late hour. In fact the debt settlement company may have already contacted the lawyers office even though the lawyer says they haven’t. Call the debt settlement company and ask for help and an update.

Being sued while working with a debt settlement company is a problem if you do not have a lump sum amount of money to use to settle with right now. In order to accumulate the money to settle, consumers typically pay a monthly amount to the debt negotiation company and they then save that money up until they have enough to make a reasonable settlement offer.

Whatever you do, do not ignore the summons or court date. If you don’t go to court, you will automatically lose. If you can afford a lesser amount right now, explain your situation and proposal to the judge. As in any legal matter, it is always a good idea to get legal representation, find a local attorney to help you with this matter or ask the debt settlement company for guidance and assistance.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Other Related Articles to Read

• Should We Use Freedom Debt Relief or an Attorney to Help Us With Debt Settlement? – Debbie
• I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Debt Settlement: Top Ten Most Misunderstood Facts
• Trapped in a Debt Settlement Contract. What to Do? – Dean
• Am I Able to Settle My Debts With My Credit Card Companies Even Though I’m Current? – Kaye
• Will I Go to Jail Because of My Debts? – Pam
• Can I Negotiate Debt Settlement or Debt Elimination With Credit Card Companies? – Jo
• I Am Working With Debt Settlement America But Now I’m Getting Sued By My Creditors. – Bee
• My Mother-In-Law Does Not Want to Go to Court. – Candy

Read the full article at GetOutOfDebt.org, click here: Lynn is Working With a Debt Settlement Company But Being Sued By Her Creditor

It seems in the face of proposed regulation over the debt settlement industry many debt settlement companies are running for the hills and trying to convert their business into one of the many attorney models out there in order to continue their advance fee approach.

The companies who are running for the attorney model cover seem to feel it will provide them with a license in order to continue charging consumers in advance for debt settlement services. The belief is that in many states, attorneys are exempt from regulations and so the advance fee model can continue under the auspices of a lawyer.

Technically, that is a bit right but a lot wrong.

It is true that lawyers are exempt from many laws and currently the thought is that attorneys will be exempt from debt settlement regulation, and while they might be right now, don’t hold your breath it will stay the same.

Just recently the new Consumer Financial Protection Bureau was created and it will take a bit of time for it to get up and running but under the watchful eye of the Consumer Financial Protection Bureau attorneys are going to be regulated in the debt settlement and debt relief space.

Section 1027(e) provides a limited exclusion for attorneys. It bars the CFPB from exercising “any authority to conduct examinations of an attorney licensed by a State, to the extent that the attorney is engaged in the practice of law under the laws of such State.” However, the exclusion does not apply “to an attorney who is engaged in the offering or provision of any consumer financial product or service, or who is otherwise subject to any enumerated consumer law or any law for which the authorities are transferred” to the CFPB.

And debt settlement will be regulated under the CFPB in Section 1002, paragraph 15(A)(viii) providing financial advisory services to consumers on individual financial matters… including (II) providing services to assist a consumer with debt management or debt settlement , modifying the terms of any extension of credit, or avoiding foreclosure.

So since the CFPB specifically will regulate those debt settlement services it seems that attorneys would not get a pass under the CFPB.

The attorney loophole is already under the watchful eye of consumer advocates and the Federal Trade Commission. See this article. And in pending legislation on Capitol Hill under the Debt Settlement Consumer Protection Act the attorney model was effectively killed in an amendment seen here.

The Critical Flaw

Currently attorneys are exempt from most states so they can carry on attorney run debt settlement services, but even now attorneys are being disbarred, bankrupted, closed down and jailed for debt settlement and debt relief related services. Don’t believe me, talk to Richard Brennan, Andy Nelms, Laura Hess, Bruce Atherton, or Brian Colombana.

What those who are enthusiastically thinking the attorney model is going to provide a safe harbor need to understand, there is no exemption for deception, misleading and fraud.

The weak link in the debt settlement business model is that charging consumers upfront for debt settlement services is the deceptive trade practice, not if it is run under an attorney or not.

As the evidence mounts, it is shown time and time again how little of a benefit consumers receive when they pay for debt settlement services in advance rather than pay for actual performance as debts are settled. Read this. No attorney is now or will be exempt from deceptive advertising or fraud.

No attorney is exempt or is going to be exempt from fee splitting. Another weak spot in the attorney model is paying agents, affiliates, or marketers of debt settlement services. It would take hardly any effort to show how money paid for debt settlement services was split among non-lawyers and the Bar associations don’t like that one bit.

Add on top of all of that the building attack against the debt settlement escrow companies of Global Client Solutions and NoteWorld and how they are getting sucked into class action lawsuits for their involvement in deceiving consumers in concert with their debt settlement vendors. Shut down those companies and it puts a wrench in the works as well.

Oh yes, let’s not forget that these debt settlement attorneys are only licensed in one or a few states. They can’t provide legal representation outside of that area. Some groups have created networks of attorneys in different states to try to cover the unlicensed states but those correspondence attorneys rarely provide representation in court when the debt settlement client gets sued, which they will. That results in unhappy clients.

The attorney model does not correct the root of the problem, advance fee debt settlement is a fundamentally flawed process.

The only thing that will happen for attorneys that put their name on debt settlement services is going to be unhappy clients who will complain to the state Bar association, attorney general and other regulators. That will put the attorney and the attorney’s license at risk. I bet other attorneys who let groups use there name to market debt related services would agree now that it’s a huge risk. Just ask Joseph Gembala, Robert Lock, John Nicolla, or Christopher Diener.

Putting an attorney in front of this mess does not change the reality that for most people with long debt settlement payment plans, stopping payments to creditors, continued collection activity, paying massive fees on enrolled debts, or getting sued by creditors — just does not work.

The efforts of the Federal Trade Commission to pass regulation have made it clear to reasonable people and the Attorneys General of 41 states that advance fee debt settlement is a deceptive trade practice levied against a disadvantaged class of consumers. And I don’t care if you are an attorney or not, when you charge for services you don’t provide and those services have already been shown to be questionable, there is no free pass.

@GetOutOfDebtGuy

I can always use your help. If you have a tip or information you want to share, you can get it to me confidentially if you click here.

Other Related Articles to Read

• Court Finds Four Problems With Attorney Model Debt Settlement Firm Allegro Law
• Debt Collectors and Credit Bureaus to Report to the Consumer Financial Protection Bureau
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• CFPB Still Moving Ahead. Enforcement and Supervision Imminent.
• Credit Counseling Against Registration of Debt Relief Providers? Huh?
• CFPB is Looking for Public Comments on Debt Relief Industry
• Consumer Financial Protection Bureau. Amazing Website. Loaded for Bear.
• What About S.3264 Passing? What Are The Odds?
• Elizabeth Warren, We Got Your Back. Wall Street Better Watch Out.
• Elizabeth Warren Needs To Be Named Director of the Consumer Financial Protection Bureau

Read the full article at GetOutOfDebt.org, click here: The Critical Flaw in The Attorney Model for Debt Settlement

Michael

“Dear Steve,

I’m almost 30 years old, have a law degree from one of the top law schools in the country, and was laid off in December after working only a few months.

In any other economy, I’d be easily employable. Sadly, the world is not looking for junior lawyers with little experience right now. I’ll probably get a job in the next six months, but at that point I may be looking at as much as a year of zero income.

That, of course, follows THREE years of law school with zero income and FOUR years of college with zero income, which allowed me to rack up quite a bit of student loan and credit card debt.

The student loan debt is about $100,000. I’m not AS concerned about it, because it is very low interest, and the payments are pretty manageable. The credit card debt, about $25,000, however, is not.

My interest rates range from 10 to 20%, and my monthly unemployment payment of about $1,200 plus another $1,000 in financial assistance from my parents (which I am embarrassed to take at this point, but I must) JUST covers my rent and the minimum payments on all my bills.

I have yet to miss a payment, but I am completely out of cash, and now putting groceries, prescriptions, healthcare, etc. on credit cards — worsening the debt burden. My healthcare costs alone are about $500 a month between insurance and treating a chronic (but not life-threatening in any way) condition.

I feel guilty every time that I open my wallet, I wake up every morning thinking about this mounting debt. I want to get out. A job — which hopefully will come soon — will help, but even then it will be tough.

I can float like this for another three months or so, but then I will start falling behind. Even if I get a job tomorrow, I will still have to put virtually ALL of my income towards debt repayment. Where should I start?

Michael”

The Answer:

Dear Michael,

My guess is that the chronic condition you suffer from is student loanitis. Right?

Seriously, as counter-intuitive as this sounds I suggest that you stop using the credit cards and stop making payments to them. Sure, it will lead to collections and screw your credit a bit but stay with me here. In the hurry to find intervention and solutions people almost always overlook the option of doing nothing.

Right now your choices are to smack your debt with bankruptcy or buy yourself a bit more time to land that elusive job. If you stop making payments you can’t afford, that will give you about six months time to land a job and start making money. At that point you can pick up the pieces and move on.

Whatever you do, keep the student loans current. After July 1, 2009 there are going to be some awesome interest rates available for you to consolidate those loans down to a stupidly low rate.

Now this situation is going to eat at your ego. Here you are, a well trained lawyer from a top law school, and you can’t pay your bills and will probably be in collections. Let me share with you the ultimate wisdom about these types of situations, “Dude, shit happens.” This isn’t about you, it’s more about a series of situations and occurrences that you have no control over that aligned to make your life hell.

In the meantime, go register with a temp company and do something, anything to make money in the interim. Many of us have had to do that in our life. Read You May be Down and Unemployed But You Are Still a Hero to Me. I’ve had to do it myself. It sucks, but it is what it is.

So what happens if you follow this approach and you can’t land a job in six months? Bankruptcy. But there is no need to fire a cannon to kill what is an annoying gnat right now.

If you do land a job and are able to start paying your bills again, the collections mess can be dealt with and with some time and repayment your credit can be healthy and strong again.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Recent Law School Grad Struggling to Pay The Bills. – Lisa
• I Could Not Afford Law School But Have Loans. What Now? – Ron
• I’m Going to Law School And Will Graduate With a Lot of Debt. – Anthony
• I’m in Law School But Considering Bankruptcy. – Jenni
• First Ever Central Florida Law Firm To Be Forced To Resign From BBB
• Alleged Obstruction Of Justice Of Attorney And Client In $188 Million Fraud
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Chapter 8 – Your Money is Your Friend
• Which Debt Settlement Company Do You Recommend? – Laura
• I Need Help Fast. They Want to Take Me to Court. – Luke

Read the full article at GetOutOfDebt.org, click here: I’m a Lawyer With a Law Degree From a Top Law School and I Can’t Find a Job. Michael

“Dear Steve,

In October 2008 I lost my job. I have 2 credit cards through Capital One and could not afford to make any type of payments on them bacause I had to pay for food and housing and a baby. I am single so no support from a spouse either to at least pay a little towards card.

I have received my phone calls and I have informed them I was unable to make any type of payment as I do not have any type of income. I have now receieved a letter from a Lawyers office and they are telling me I must pay account in full which both together is only 3,000 dollars which isn’t near as much as some peoples debt I canunderstand. I however have no way to pay at all.

They informed me if I do not pay that legal action will be taken and I will be sued.

I called the office and told them what are my options that I have no income at this time and the man I spoke with told me it didn’t matter if I did not pay, Capital One will sue me for the monies owed and that was it.

What can I do? I own nothing, no home, car, no pensions, 401k, I have nothing to my name at all.
What can I do should I just file bankruptcy and be ruined which my credit already is, so what is the difference, I know there is money to pay for bankruptcy also, do you have any suggestions.
I am actively searching for a job , currently my parents have been helping me, but they are barely helping thierselves so I can’t ask them to pay my bad debt and they are my only famly.

Thank you,

Amanda”

The Answer:

Dear Amanda,

There is a huge difference between owing a debt and logic.

Logically you have no way to pay this debt at this time. But Capital One had dumped you in their massive collection hopper of people that owe them money. They are not going to treat you as an individual, but grind you along with everyone else in the hopper.

For them, that process will involve suing you. While you don’t have anything now, they are betting that you will in the future so they are going to stake their claim in you now for a future payoff.

No matter why or how you got in this situation, the facts now are that you are barely making it, you are actively looking for a job and you have no family financial support network. It is what it is.

At this point the only way to legally end this debt and claim against you would be to file bankruptcy. It is not a judgment about if it is right or wrong, but like the debt, it just is what it is. Going bankrupt and ending this debt might just be the most responsible thing you can do right now.

I would suggest that you contact a local bankruptcy attorney and call to schedule a free bankruptcy consultation appointment to go in and discuss the situation.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• I’m in College and Getting Sued by CapitalOne. What Do I Do? – John
• Thanks for This Website! – Rocio
• I Have No Job. Should We Consolidate Our Debt or Go Bankrupt? – David
• I’m a Low Income Single Mother With a Disabled Son and Collectors are Chasing Me. – Milla
• I Was Scammed By a Debt Consolidation Company in New York. – Maria
• Capital One is Suing Me and I’m Really Depressed. – Genie
• I’ve Made an Appointment With a Credit Counselor But What Should I Do? – Mary
• I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene
• Capital One is Calling Me Every Day Even Though I Am Disabled. – Debra
• Capital One Sued Me And Got a Judgment After the Case Was Dismissed. – Linda

Read the full article at GetOutOfDebt.org, click here: I Had a Baby, Lost My Job, and Can’t Pay My Credit Cards. – Amanda

“Dear Steve,

I let an Amex card that was originally used for business by an associate, but in my name, go uppaid and unanswered. It is now being handled by a law firm. They have filed a lien against any property I may purchase in the county in which I live. I do not have the means to pay them much – maybe $100/month on a $7,000+ balance. The debt was incurred in 2005. I do have other credit card debt, but am managing to at least pay the minimum on them.

Should I try to contact the law firm to work something out?

Carol”

The Answer:

Dear Carol,

Well I guess it is a bit of a double edged sword here. On one side I’m always in favor of establishing direct communications if you have the ways and means to repay a debt you owe. On the other hand I’m worried that if you commit this last $100 a month, which might not be enough to appease the debt collectors, it will leave you so strapped and tight for cash on a monthly basis that you’ll tip into a greater financial mess.

You might be better to save the $100 a month in a boring savings account and then when you get $3,500 saved up you could approach the collector with a proposal to clear the lien and debt for a lump sum $3,500 payment. If you do that, be sure to get the agreement in writing before you send the payment and then send your payment via Fedex or UPS so it can be tracked.

Alternatively, you could contact a local attorney and find out what the statute of limitations is in your state and see how much longer than can attempt to collect on this debt. If you decide to do this, contact the attorney before you contact the law firm chasing you.

Let me know what you decide to do.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Bill Collectors Keep Calling About a Truck We Paid Off in 2003. – Stephanie
• I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene
• Can My Creditors Take My Daughters Money From the Bank Account I Started for Her? – Beth
• Now That I’m on Social Security Disability Can I Stop Paying My Judgment? – Wendy
• Where Do I Put My Judgment in Line For My Debt Snowball? – Bret
• Can Credit Card Companies Put a Lien on My House for My Charge Offs?
• I Have a Lot of Credit Card Debt, a Repossession and a Judgment. – Eric
• First Ever Central Florida Law Firm To Be Forced To Resign From BBB
• I Have an Old Judgment Against Me That Has Come Back Up. – James
• Alleged Obstruction Of Justice Of Attorney And Client In $188 Million Fraud

Read the full article at GetOutOfDebt.org, click here: I Owe Amex and Now They Have Lawyers Chasing Me. What Should I Do? – Carol

“Dear Steve,

My Brother-in-Law is deeply in debt. He was laid off from work 6 years ago and hasn’t found a decent job since. He isn’t very smart when it comes to money and lived off his savings until it was all gone. He is now 60 years old, has several thousands of dollars on credit debt, owes thousands in taxes because he cashed out his 401K.

He gets a pension from his previous employer of about $800/month. He substitute teaches which brings in about $120/day when he gets a job. The credit union he belongs to takes money from his account to pay his credit debt, so he doesn’t have any money to live on.

He is staying at a shelter instead of renting a room. He talked to some of the lawyers who would help him with his problem, but they want to be paid several hundred dollars for their work. He doesn’t have that kind of money, so he basically is stuck.

What options does my brother-in-law have in getting clear of his debt (including taxes) so he can have enough to get a place to live and keep his pension?

Tim”

The Answer:

Dear Tim,

The best thing you can do for your brother-in-law is to help him out by paying for the lawyer. There are no simple of easy solutions to deal with his combination of debt, especially the IRS debt.

While the IRS is a kinder and friendlier government entity these days, even a reduced repayment plan, like an offer in compromise is going to require some funds to pay back at least part of the debt.

Maybe you and other family members could all pitch in and pay for the lawyer appointment so he can get some help.

I’m curious, why doesn’t he just switch banks so that he can keep some money to live on?

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Get Free Help and Advice From Former IRS Agent
• Marriage and Money: How to Talk to Your New Spouse About Finances
• How to Deal with the IRS if You Can’t Pay Your Taxes
• I’ve Liquidated My Savings, Checks and CDs But I’m Still in Debt. – Jennifer
• I Feel So Embarrassed, Ashamed, and Without Hope Because of My Debt. – Karen
• Advertisements About Eliminating IRS Debt Not Honest
• I’m Unemployed, Homeless, Pregnant, and Just Lost My Car. – Jannie
• Can I Legally Do Anything to Eliminate Some of My Crushing Student Loan Balance? – Mark
• Offer In Compromise Rules Relaxed by IRS. Big News!
• Should I Take Out a Loan from My 401k to Payoff Credit Cards? – Terry

Read the full article at GetOutOfDebt.org, click here: Substitute Teacher Lives in Shelter Instead of Paying Rent. – Tim

Michael

“Dear Steve,

I ran up about $30,000 in credit card debt in college, law school, and in nearly eight months of unemployment following law school. I recently managed to find and started a good job at about half the salary that I expected I’d be making. Between my student loan payments, and the minimum payments on my credit cards, and utilities, I have about $200 a month to live on for food, entertainment, etc.

My lease is up in December, and I plan on moving to a less expensive place to save another $400 a month or so, but my budget is stretched very thin and I can’t seem to do more than just pay the monthly minimum. I am current on all my payments except for one (where I worked out a deal with American Express to pay the entire bill back in 10 months, and they will not charge me any interest or penalty at all as long as I don’t miss a payment.)

I have put all my credit cards in a drawer, and am going cash-only for the immediate future.

Am I a good candidate for debt settlement? If I didn’t have all this credit card debt, I would have enough salary to live comfortably. The way things are now, the same day my biweekly paycheck is deposited, all but $100 goes out the door. I’m not saving a dime, and I’m not enjoying life to its fullest.

Michael”

The Answer:

Dear Michael,

Nobody is a “good” candidate for debt settlement. The process is full of more holes and creates more problems than it solves. If you want to trash your credit, potentially have a big tax bill, and go into collections, go with debt settlement.

Your situation is one of basic components. Your income is insufficient to pay for the lifestyle you have, no matter how meager it is. This is due to the burden of previously financed activities that you are dragging forward with you from your college days and beyond.

In the end it really isn’t the size of the debt that is important, it is the impact in your life of that debt. As you report, that impact is significant.

If life has become unsustainable and you need a financial break you are better served and protected by law by pursuing bankruptcy. Under bankruptcy your debts will be reduced or eliminated, you will know a specific end date when you will be able to start over and there is no potential tax liability to you for the forgiven debt. To learn more about bankruptcy and your situation, please go talk to a local bankruptcy attorney and ask all the questions you can think of.

I think that what you will find is that be embracing the situation and taking control to put a solution in place, even if it is bankruptcy, that you will be able to find new vigor and enthusiasm for life and move forward in a more positive way.

Your credit can be rebuilt following bankruptcy but wasted years of ineffective debt repayment through debt settlement can never be recovered again.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Other Related Articles to Read

• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Can I Include My Debt Settlement Company in My Bankruptcy? – Ken
• I Can’t Afford My Debt Settlement Program Anymore and Want to File Bankruptcy. – Tony
• Should I Sign With Fast Track Debt Relief? – Mary
• Debt Relief industry Trends, June, 2011 – Credit Counseling, Debt Settlement, Bankruptcy
• Debt Settlement: Top Ten Most Misunderstood Facts
• Trapped in a Debt Settlement Contract. What to Do? – Dean
• Am I Able to Settle My Debts With My Credit Card Companies Even Though I’m Current? – Kaye
• Lynn is Working With a Debt Settlement Company But Being Sued By Her Creditor
• How Do You Value Your Quality of Life? Debt Solutions to Fix The Future

Read the full article at GetOutOfDebt.org, click here: I Graduated From Law School But Barely Getting By. – Michael

“Hi Steve,

I’m drowning in debt–about 60,000–but was managing to pay off some accounts and really wanted to do the John Commuta thing, debt avalanche…go that route. To do it, I had to do some juggling between accounts because I’m freelance and my income varies from month to month, but still, it was working and I could see my way clear. Then everything changed. When the banks started shrinking credit and cash lines and upping interest, it kind of sabotaged my plan. I’m hanging on by my fingernails now and it’s starting to look hopeless. As they lower my limits, I’m trapped in the incredible shrinking box.

I’m starting to think about debt settlement, but will this ruin my credit? My score’s around 660 now, not good, I know. So now I’m thinking, if I self-destruct through debt settlement, how much do I have to lose? It’s getting hard to stay afloat, and I feel close to crash and burn. It hasn’t happened yet, but can you tell me what’s the worst possible thing that could happen if I do try debt settlement? Is it fatal to my credit rating, or a sensible option? Or is it better to just walk away? And is it OK if I negotiate myself? I’m good at PR, and think I can handle it. The companies that advertise seem a little skanky, but do you think hiring a company that has a lawyer attached is a good move? Sounds expensive, but I owe so much that maybe it’s worth it. Help!

One more thing: Seems to me that so many people must be in this boat that the credit rating standards will have to change in the future. I mean, if a lot of people opt for debt settlement, do you think they’ll have to readjust the curve? Or that it will be easier in the future to improve a bad rating that comes from debt settlement or crash and burn? Bottom line: Like so many others, I want to do the right thing and pay my debts off, but these killer interest rates and shrinking limits are unbeatable. From your perspective, do you think that so many of us will crash and burn that the banks will have to welcome us back in the future?

Thanks so much for what you do. I think it’s amazing.

Jerry”

The Answer:

Dear Jerry,

Thank you for writing to me. Your question really brings up some great points.

First, you made a statement that a debt settlement solution that has a lawyer attached to it must be a more legitimate solution. Sadly, no. Just search GetOutOfDebt.org for “Allegro Law” and you’ll find sordid details about a debt settlement lawyer company that not only was closed down but the lawyer lost his license. This is not the only example. Do a search for “Hess Kennedy”, a Florida law firm that was also put out of business.

Secondly, I think that a debt settlement approach is going to be a failure for you as well. Not just because debt settlement does not work for most people, but because of your income situation it will be nearly impossible for you to have the lump-sum money on hand to settle right now. If you enroll in a monthly payment debt settlement program you will not be able to pay all their front loaded fees and save money to actually settle.

During the time you are saving, a s*%$^ storm of collections, bad credit, and a lawsuit or two will rain down on you. Debt settlement will result in years of bad credit, a big potential tax liability and being sued.

Frankly, the better answer is bankruptcy. You should go an talk to a local bankruptcy attorney and discuss your situation. Most bankruptcy attorneys offer a free bankruptcy consultation so you can get all your questions answered.

The irony is that bankruptcy will discharge this debt quicker than debt settlement, will not result in a tax liability, will stop collection activity and block lawsuits.

Once you go bankrupt you will then be able to rebuild your credit and be able to get credit again in the future. If you do go bankrupt, come back and ask me for help rebuilding your credit and I’ll show you how. It’s actually ridiculously simple.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Lynn is Working With a Debt Settlement Company But Being Sued By Her Creditor
• I Graduated From Law School But Barely Getting By. – Michael
• Florida Attorney General Wants Debt Settlement Companies to Put Up Before You Pay Up
• Fewer Than Ten Percent Get Out of Debt With Credit Counseling or Debt Settlement Companies
• Debt Settlement Companies and Associations Hiring Washington Lobbyists to Persuade Congress
• Debt Settlement Company Success Rate Made Public – Sucks
• The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy.
• I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene
• Can I Include My Debt Settlement Company in My Bankruptcy? – Ken

Read the full article at GetOutOfDebt.org, click here: I’m Trying the John Commuta Debt Avalanche Approach but Think I Should be Doing Debt Settlement. – Jerry

“Dear Steve,

Because of a family situation I was forced to go into debt consolidation with a company in NY. I went into contract with them. I paid my monthly amount for one year. At the first of the month of November, I received a legal notice, from a law firm in Miami that this company, headed by a lawyer, was closed down and the lawyer was disbarred for stealing the clients monies. Hence, I was being notified that in order to recover my monies, if at all possible, I needed to supply proof of all my payments. It is now in litigation. I was also told I could contact another debt consolidation company to handle my debts. The litigation is to be settled by April of 2009. And I am not guaranteed that I will receive any
monies, since the lawyer being charged has assets that do not match her obligations.

Meanwhile, I am starting to receive phone calls from the company who is handling one of the credit card companies. And he is threatening me that the
company is going to sue me for breach of contract. I am desperate to know what to do. And can in the state of Pennsylvanis garnish your wages for this situation?
I am 65 work part-time, receive Social Security and have no assets whatsoever. No savings, or investments, no 401 K and I live in a Hud regulated housing. My income is just not able to support and further financial needs.

What, should I be doing to start resolving this situation? Can I lose my part-time job and have my wages garnished in all this at this time?

Maria”

The Answer:

Dear Maria,

I am so sorry you got scammed. You did not mention the company but your situation sounds a lot like the Laura Hess mess. I wrote about this in “Lawyers Lose Licenses Over Debt Relief. Dangerous Waters For All“.

I certainly hope you recover money for you losses and get a check back sometime in 2009.

Your creditors have every legal right to sue you for non-payment. it isn’t their fault you got scammed. All they care about is that they are not getting paid.

Based on your assets, you sound as if you are almost judgment proof. Meaning, if a creditor sued you and won, there would be nothing they could go after except some of your part-time income. This is a legal matter and you’ll need to speak to a lawyer licensed in your state for specific advice.

But rather than worrying about when you will or might get sued over these past debts, and based on your assets, I think there is a strong case to be made for you to consider bankruptcy at this time. Bankruptcy will close the door on these debts so you’ll never need to worry about them again. Any payment plan you enter into at your age and with your lack of savings would be financially reckless on your part. Don’t do it. You are not a good candidate for a credit counseling or debt consolidation program, in my humble opinion.

So you asked what you should do to start resolving this situation, I think you need to meet with a bankruptcy attorney. Click here to get a free bankruptcy consultation. If you meet with a bankruptcy lawyer for free to discuss your situation you can also get a free answer to your question about the restriction on garnishment of your part-time wages in your state. From that free bankruptcy consultation meeting you should walk away with information that will either convince you to file bankruptcy or answer your questions about having your wages attached.

Please Maria, think nine time before launching into a debt consolidation program, it really isn’t a good fit for your situation. I know you want to do the right thing but in my book, the right thing would be to file bankruptcy and work and save whatever you can moving forward.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• How Do I Handle the One Creditor Not in My Debt Consolidation Plan That is Suing Me? – Tony
• I Had a Baby, Lost My Job, and Can’t Pay My Credit Cards. – Amanda
• I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene
• First Ever Central Florida Law Firm To Be Forced To Resign From BBB
• An Old Discover Credit Card Account is Going to Garnish My Wages. – Steve
• Can My Old Bank Take Me to Collections for a Checking Account? – Mark
• Alleged Obstruction Of Justice Of Attorney And Client In $188 Million Fraud
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Chapter 8 – Your Money is Your Friend
• I Got a Salary Garnishment from Discover Card. – David

Read the full article at GetOutOfDebt.org, click here: I Was Scammed By a Debt Consolidation Company in New York. – Maria

“Dear Steve,

I have approximately $50k in credit card debt. My interest rates and limits have recently skyrocketed and I cannot make the minimum payments. Although I am current on all bills (this will last for about 1-2 more months), as my savings have been depleted. Right before graduating from law school in 2008 I was laid off from a very well paying job and remained out of work for about a year. I have now been working for about 8 months but at a much lower salary.

I have done substantial research on debt settlement companies and I am considering going with a performance based company, so payment made after settlement, although total fees still very high. I have also spoken with a local bankruptcy attorney (its seems I don’t qualify for Chapter 7) and Chapter 13 would have me repaying for 5 years plus it stay s on my credit for 10 years after completing the 5 year repayment.

I recognize that none of my options are ideal, but I would like to minimize the negative effects on my credit as I would like to continue to pursue job opportunities and potentially sell my home and purchase another one within the next 5 years.

My current credit score is okay — 600, 680, 690. I understand all tax implications but I am currently considering using my 401K to pay off a couple of accounts and have money to make the monthly payments on a couple of other accounts, but I don’t have enough to pay off all the accounts.

Since bankruptcy seems to be out the question, as I am not willing to give 15 yrs of negative reporting, should I take the chance of using a performance based debt settlement company for the next 3 years? or pull money from my 401K and then attempt to settle one large credit card on my own for less of a negative credit hit?

Paula”

The Answer:

Dear Paula,

Hopefully I can prevent you from making a huge mistake here. As far as taking money out of the 401(k) I think you need this other post I wrote today, Should I Cash Out My 401K to Pay Off My Credit Card Debt? – Angie. I think that sums up how I feel about robbing the 401(k).

I think you are a bit confused on the credit reporting thing with bankruptcy. A Chapter 13 bankruptcy is reported seven years from the date you file, not the date it ends. But if you do a debt settlement you will need to fall behind on your debts and they will be reported negatively for seven years from the date of default.

I’ve written so much about the problems with the debt settlement industry today that I hate to write about it all over again. Just search debt settlement on this site and you’ll see tons of posts about how consumers get royally screwed with debt settlement.

Bankruptcy does not mean you will not be able to get a mortgage and get future credit. And as far as having a bankruptcy on your credit report while looking for a job, imagine what it would look like with all of your accounts delinquent and then some written off as bad debts because you are in debt settlement.

And since you went to law school and have an interest in the law wouldn’t you rather pursue a solution that gives you rights and protections from your creditors, bankruptcy, rather than one that leaves you exposed to lawsuits and aggressive collectors, debt settlement?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Other Related Articles to Read

• First Ever Central Florida Law Firm To Be Forced To Resign From BBB
• Alleged Obstruction Of Justice Of Attorney And Client In $188 Million Fraud
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Chapter 8 – Your Money is Your Friend
• Want to Incur High Student Loans and Have Grim Job Prospects? Go to Law School.
• Lynn is Working With a Debt Settlement Company But Being Sued By Her Creditor
• The Critical Flaw in The Attorney Model for Debt Settlement
• I’m a Lawyer With a Law Degree From a Top Law School and I Can’t Find a Job. Michael
• I Had a Baby, Lost My Job, and Can’t Pay My Credit Cards. – Amanda
• I Owe Amex and Now They Have Lawyers Chasing Me. What Should I Do? – Carol

Read the full article at GetOutOfDebt.org, click here: I’m a Lawyer and Drowning in Debt. – Paula

Stephanie

“Dear Steve,

My husband had bought a (used, but newer) truck a few years before we married (around’03?) He sold the car(truck) because full insurance with his driving history (at the time) made insurance and payment more than the rent payment. He knew he was “upside down” on the truck lien when he decided to sell it.

Trying to get to the point, he found a buyer, and he paid the difference between what the bank said he owed, and what the buyer paid. So, with that the lien was signed off and the title released to the new owner. Now, some 5+ years later, he’s getting calls (no mail which he requested regarding this matter). from the Law offices of Mitchel N. Kay. He keeps getting calls from them.

He originally wrote letters disputing this, obviously to no avail. If the lienholder released the lien on the title, How can they say he still owes money? (They claim /admitted that it was a computation error on their part as to the payoff amount, but they released the lien, How can they do this? My husband wants to borrow money to purchase an established car lot, but this is holding him back, other than disputing this again, any other suggestions about how to get this off his record and the Mitchell N. Kay people from placing automated cals to my cell, even after my husband asked them to notify him of this alleged debt by mail, and not to call the # again.

I’ve got a record on my cell of the calls, can’t they be fined for calling, after being told #1 that is not his phone and #2, not to call again. Thank you, thank you, thank you for any advice you have. “Googling” Mitckell N. Kay, come up with tons of negative complains agains him, I wish he/they could be shut down.

Many thanks,

Stephanie”

The Answer:

Dear Stephanie,

As long as you can prove that the lien was released by the original creditor I can’t see where they’d have a reasonable case. Maybe they are making the argument that you can’t benefit from a gain that was given to you in error.

Since getting the car lot is dependent on resolving this quickly I would suggest that you contact a local attorney to represent you in this matter. Once your attorney contacts them and tells them he or she is representing you, they should stop calling you.

It seems that this matter is best resolved with communication between professionals and an application of the law rather than getting yourself upset and winding up in a pissing contest with the collector that isn’t interested in or going to resolve the issue.

Do you think that approach makes sense?

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• I Owe Amex and Now They Have Lawyers Chasing Me. What Should I Do? – Carol
• There are Good Debt Collectors and Then There Are Debt Collectors That Lie, Cheat, Steal, and Threaten
• Can I deal with the original creditor instead of the collection agencies? – Theresa
• Can Credit Card Companies Put a Lien on My House for My Charge Offs?
• DEBT COLLECTOR BLUNDERS? GET A RECORDING!
• First Ever Central Florida Law Firm To Be Forced To Resign From BBB
• Alleged Obstruction Of Justice Of Attorney And Client In $188 Million Fraud
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Chapter 8 – Your Money is Your Friend
• Debt Collectors Want Some Respect

Read the full article at GetOutOfDebt.org, click here: Bill Collectors Keep Calling About a Truck We Paid Off in 2003. – Stephanie

“Dear Steve,

Due to a loss of income last year we have been unable to pay numerous credit card companies. We are stable now but cannot catch up.

One of the accounts was charged off in the mean time and it was purchased by a debt-collection company. I have received a letter and a few phone calls from someone in an attorney’s office. They have even contacted relatives to talk to me.

How should I handle this situation with this supposed lawyer on this charge-off account?

Jeff”

The Answer:

Dear Jeff,

Let’s start with it is what it is. You are behind on debt, you agree that the debt is yours, the person calling you is attempting to collect the debt.

If you are back on your feet but can’t catch up then you might want to talk to a local bankruptcy attorney about what bankruptcy would mean for you. By discharging your old debt and moving forward with your life you can close that chapter and stop looking over your shoulder.

Leaving a debt that can’t be repaid just fester is not going to make the situation better.

At this point you are probably better off, being polite, but talking to the lawyers office and see what they want. If you can’t afford to pay, you can’t afford to pay.

Find a local bankruptcy attorney. Call and make an appointment for a free bankruptcy consultation.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Tennessee Protects Citizens From Debt Collectors. Arizona Serves Them Up.
• DEBT COLLECTOR BLUNDERS? GET A RECORDING!
• First Ever Central Florida Law Firm To Be Forced To Resign From BBB
• I Was Sending Less Than The Minimum Payment But What Happened to My Account? – Jan
• Alleged Obstruction Of Justice Of Attorney And Client In $188 Million Fraud
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Chapter 8 – Your Money is Your Friend
• I Had an Account Charge Off, Tried to Settle It, But Now I Can’t Pay. – Will
• Hooray, You Are in Collections! The Debt Collector is Calling. The Debt Collector is Calling.
• Free FDCPA and Debt Collection Violation Help Now Available from GetOutOfDebt.org

Read the full article at GetOutOfDebt.org, click here: What Do I Do About Lawyer Calling Me to Collect on Old Debt? – Jeff

Darlene

“Dear Steve,

My husband and I have a judgement against us from Chase for $5200. Our debt settlement company said they would answer the summons for us. The lawyer from Chase said they don’t work with debt settlement. We told them we didn’t have the money to pay (may be losing our home). The next thing we know we received some documents from the local justice court saying “Judgement by Default Without Hearing.” We can’t afford a lawyer and dont know what this means.

The documents we received read “Motion and Affidavit For Entry Of Judgement By Default Without Hearing” Does this mean we just have to find a means to pay it without Chase taking us to court?

Darlene”

The Answer:

Dear Darlene,

There is no rule or law in the United States that any creditor must work with your appointed third-party. In this case, your debt settlement company.

Working with a debt settlement company does not prevent you from being sued, even if the debt settlement company responds to any document or summons on your behalf.

The law allows the creditor to pursue their contractual rights through your agreement with the creditor, and under the law, in the courts.

If you are not paying Chase and have broken your agreement with them, they can sue you and you seem to have no defense to that claim.

I’m not going to address the specific issue about the document they asked you to sign except to tell you to immediately contact an attorney licensed in your state for specific legal advice or contact a local bankruptcy attorney, to go bankrupt and end this issue.

If I was a betting man, which I am not, at least with real money, the safe bet would be that you will lose this fight with Chase, be successfully sued, and that will lead to a judgment against you and a lien against property, wage garnishment, or bank account garnishment.

Somehow I need to convey to you in a loving and caring way that you need to pull your head out of the sand on this issue and go get legal help. Once you do that, this situation with Chase bank will be resolved, probably through bankruptcy. Let me know what you decide to do.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• I Am Working With Debt Settlement America But Now I’m Getting Sued By My Creditors. – Bee
• My Mother is Being Sued by Chase. All She Gets is Social Security Income. – Helen
• Lynn is Working With a Debt Settlement Company But Being Sued By Her Creditor
• My Mother-In-Law Does Not Want to Go to Court. – Candy
• I’m in College and Getting Sued by CapitalOne. What Do I Do? – John
• I’m in a Debt Settlement Program and I’m Terrified. – Magen
• I Got a Court Summons for Credit Card Debt. What Do I Do? – Denise
• It’s Been A Year Since The TSR – What’s Changed With Debt Settlement?
• Credit Card Debt Lawsuit – Consequences of Settlement Done Wrong
• My Apartment Complex is Suing Me for Money I Do Not Owe. What Should I Do? – Michael

Read the full article at GetOutOfDebt.org, click here: I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene

An attorney in Texas has lost his law license over unpaid debts and student loans. Pretty scary but totally unnecessary and avoidable.

When attorney Frank P. Santulli III first ran into financial troubles in 2001, the Texas Board of Law Examiners ordered Santulli to enter into a debt management plan with Consumer Credit Counseling Service. But in May of 2002 Santulli fell behind on his payments. Another classic example of when a debt management plan is not a good idea. It is not a magic wand that makes every situation better.

Santulli testified that due to family illnesses and changes in his work status, he had fallen behind on his CCCS plan and had not made payments since December 2001; he had arranged for his student loans to be deferred. Although Santulli did not want to file for bankruptcy, he testified that he was “looking into it.” Santulli had not yet retained a bankruptcy attorney, but he said he was supposed to meet with one in mid-January 2003.

Eventually Santulli did file for bankruptcy but not until years latter. By then it was too late and the State of Texas felt that the lack of action, within the original time and extended time given, by Santulli was an indication that he “failed to demonstrate that he was a person of good moral character.” The Board also determined that Santulli’s lack oof action was “indicative of a lack of trustworthiness in carrying out responsibilities, especially given his prior failure to comply with the conditions of his agreed order with the Board.”

Basically what happened to Santulli is a classic debtor story. He was in debt and forced to enter into a solution that was never right for him, the credit counseling path. He chose CCCS as a perceived softer solution than bankruptcy and he dragged his feet on discharging his debt with bankruptcy, for whatever reason. He simply became paralyzed into doing nothing and letting his financial condition fester. Doing nothing is never a good idea and in this case the lack of any responsible action lead to more dire consequences, the loss of the license to practice law.

Here is what the court had to say in its finding.

This appeal arises from a recommendation by appellee the Board of Law Examiners that appellant Frank P. Santulli, III’s probationary license to practice law should be revoked. We affirm the trial court’s order affirming the Board’s recommendation.

On June 22, 2001, the Board approved an agreed order recommending Santulli for a two-year probationary license. Santulli, who was carrying a substantial amount of student loan and personal debt, had already entered into a debt management plan with Consumer Credit Counseling Services (CCCS) and had started making payments under that plan. In the agreed order, the Board required Santulli to make payments under the CCCS plan and in accordance with a student loan debt management program and to provide proof of those payments periodically. (1) Santulli initially met those conditions but by May 2002 had fallen behind on both his student loans and his CCCS plan.

On December 6, 2002, the Board held a hearing to determine whether Santulli’s license should be revoked due to his failure to meet the conditions set out in the agreed order. Santulli testified that due to family illnesses and changes in his work status, he had fallen behind on his CCCS plan and had not made payments since December 2001; he had arranged for his student loans to be deferred. Although Santulli did not want to file for bankruptcy, he testified that he was “looking into it.” Santulli had not yet retained a bankruptcy attorney, but he said he was supposed to meet with one in mid-January 2003. The Board expressed concern that Santulli could find himself “in a situation where you’re in so much debt and under so much pressure that there are opportunities and temptation either to short-shrift your clients or, you know, in the worst case scenario, convert money from your clients to take care of those debts.” The Board asked, “[I]f the Board were to see fit to extend your probationary license for another six months, that would in effect give you one year in which to consult with your bankruptcy attorney, consult with business planners and be prepared to present us with a business plan, could you commit to having a comprehensive plan to us before the expiration of that probationary license?” Santulli answered that a six-month extension would be “more than generous.” One Board member said, “I don’t doubt that you have good intentions and that you have the intent to do these things, but you need a plan. . . . Saying ‘I have an intention to pay it’ is not going to cut it.” Santulli agreed and said he would “[a]bsolutely” decide about whether to file for bankruptcy in mid-January and would let the Board know his decision “[i]n detail.”

In an order dated December 12, 2002, the Board granted Santulli a six-month extension with an amended set of conditions, including requiring him to “make suitable arrangements for payment or discharge of all of his past due debts during the term of his probationary license, and [to] detail any such arrangements with each of his periodic questionnaires” (“Condition One”). The Board’s order found that Santulli’s failure to comply with the payment conditions of the agreed order was “indicative of the character trait of a lack of trustworthiness in carrying out responsibilities” and concluded that there was a clear and rational connection between Santulli’s “lack of trustworthiness in carrying out responsibilities . . . and the likelihood that Mr. Santulli would harm a client, obstruct the administration of justice, or violate” the disciplinary rules. The order included a “conditional finding of good moral character and fitness, predicated on Mr. Santulli’s faithful compliance with the conditions of this order,” but provided that, in the event Santulli’s probationary license was revoked due to violations of any of the order’s conditions, such revocation would “conclusively establish on the part of Mr. Santulli a lack of trustworthiness in carrying out responsibilities, making it likely that he would injure a client, obstruct the administration of justice, or violate the disciplinary rules of professional conduct.” The order placed on Santulli the burden of presenting “evidence addressing . . . any character and/or fitness issues covered in this Order.” Santulli did not object to or seek judicial review of the 2002 order.

On December 5, 2003, the Board held another hearing related to Santulli’s probationary license. Santulli testified that he had not made any more payments on his debt or filed a petition in bankruptcy. He explained that at the end of February 2003, he had “made arrangements” with a bankruptcy attorney, doing some family-law work in exchange for bankruptcy assistance, but that he learned in August that the attorney had moved out of state. Santulli hired another attorney sometime in October, and Santulli and his new attorney had decided to proceed with a bankruptcy petition. Santulli believed the bankruptcy petition would be filed within 30 days. He asked the Board to give him another month to file for bankruptcy, explaining that he had recently been hired to lead a family-law section of a law firm and that he would restart making payments on his student loans at the end of December 2003.

On December 11, 2003, the Board issued an order finding that Santulli had violated Condition One of his probationary license by failing to make suitable arrangements to pay or discharge of all of his past due debts. The Board determined that Santulli’s failure in this regard indicated a lack of financial responsibility, trustworthiness, and the good moral character required for bar admission. The Board concluded that there was a clear and rational connection between Santulli’s lack of financial responsibility and the likelihood that he would harm a client, obstruct the administration of justice, or violate a provision of the disciplinary rules and recommended that Santulli’s probationary license be revoked. See Tex. R. Govern. Bar Adm’n XVI(g)(2)(B) (West Supp. 2008) (after hearing, “upon a finding that a condition of the Probationary License has been violated,” Board may recommend termination or revocation of probationary license). (2)

Santulli sought judicial review of the Board’s 2003 order. The trial court considered the administrative record and affirmed the Board’s decision, finding that the order was supported by substantial evidence. On appeal, Santulli complains that the Board’s order was not supported by substantial evidence, that Condition One was arbitrary or capricious because it was not supported by substantial evidence, and that the Board erred in finding that Santulli lacks the good moral character required for bar admission. We affirm the trial court’s order.

Discussion

An applicant for bar admission is entitled to judicial review of a negative character determination by the Board. See id. R. XV(k) (West Supp. 2008); Board of Law Exam’rs v. Coulson, 48 S.W.3d 841, 844 (Tex. App.–Austin 2001, pet. denied). The Board’s decision is reviewed under a “substantial evidence” standard, and the reviewing court may either affirm the determination if it is “reasonably supported by substantial evidence” or remand the matter to the Board. Tex. R. Govern. Bar Adm’n XV(k)(5); Coulson, 48 S.W.3d at 844. An applicant complaining of the Board’s decision has the burden of showing a lack of substantial evidence. Unglaub v. Board of Law Exam’rs, 979 S.W.2d 842, 845 (Tex. App.–Austin 1998, pet denied.).

When reviewing a decision for substantial evidence, the test “is whether the evidence as a whole is such that reasonable minds could have reached the conclusion that the agency must have reached in order to justify its action.” Texas State Bd. of Dental Exam’rs v. Sizemore, 759 S.W.2d 114, 116 (Tex. 1988). We consider only the record on which the Board relied in reaching its decision and will not substitute our judgment for that of the Board. Coulson, 48 S.W.3d at 844. Our review requires that there be more than a mere scintilla of evidence, but the evidence “may actually preponderate against the decision” of the Board and still amount to substantial evidence. Id. We are concerned with the reasonableness of the Board’s order, not its correctness. See State v. Public Util. Comm’n, 883 S.W.2d 190, 203 (Tex. 1994). “If reasonable minds could have reached the conclusion that the Board reached on the record presented, then we must uphold its decision.” Board of Law Exam’rs v. Stevens, 868 S.W.2d 773, 778 (Tex. 1994).

Santulli asserts that (1) the trial court erred in determining that the Board’s order was supported by substantial evidence, (2) Condition One was arbitrary or capricious and not supported by substantial evidence, (3) and (3) the Board erred in determining that Santulli lacked good moral character. Santulli’s complaints are based largely on his claim that the term “suitable arrangements” in Condition One is ambiguous and unenforceable because the order does not specify “what suitable arrangements would be acceptable.” Santulli also argues that “the Board never stated a deadline for the suitable arrangements to be concluded.” He goes on to argue that even aside from those failings, the record is clear that he “made arrangements to comply with the conditions of his probationary license.” We first address Santulli’s complaints related to Condition One.

Santulli did not complain of or seek judicial review of the 2002 order that imposed Condition One. See Tex. R. Govern. Bar Adm’n XV(k)(1) (applicant must institute proceedings for judicial review of Board decisions within sixty days after decision is mailed to applicant). Further, Santulli did not assert before the trial court that the condition was ambiguous. Thus, he may not attack the 2002 order in this suit for review of the 2003 order.

Further, we disagree that the term “suitable arrangements” was ambiguous as used in the order. The testimony from the 2002 hearing, where the Board granted Santulli a “more than generous” six-month extension, established what the parties understood “suitable arrangements” to mean. The Board told Santulli that it wanted a “comprehensive plan” regarding the payment or discharge of his debt and that having the intention to pay or manage his debt would not suffice. The panel wanted Santulli to “account for this debt in such a way that we can be assured that you’re not a danger to the public,” and it told Santulli that merely hiring an attorney to explore bankruptcy options did not and would not satisfy its concerns. Santulli expressed no confusion about what the Board required of him and never complained that the condition was ambiguous until this appeal. We overrule Santulli’s complaints related to Condition One’s asserted ambiguities. (4)

We next consider whether Santulli has met his burden of showing that the order is not supported by substantial evidence, starting with whether the evidence supports a finding that Santulli failed to make suitable arrangements to pay or discharge his debts.

In December 2002, the Board questioned Santulli about his finances and what he planned to do about his debt load. He was told in no uncertain terms that he had one year to take action toward managing his debt and that merely intending to discharge his debts was not enough. A year later, Santulli had done nothing toward discharging or paying his debts other than having secured a new bankruptcy attorney in October 2003. Although Santulli made arrangements with an attorney in late February or early March 2003, he did not attempt to contact the attorney until June or July. He learned in August or September that the attorney had moved out of state, did not hire another lawyer until October, and by December, had not filed for bankruptcy, although he testified that he intended to do so in the next month. Santulli was cautioned in 2002 that good intentions were not enough and that he would have to show progress toward discharging his debts, but he was in essentially the same position a year later, despite the Board’s cautions and a six-month extension.

Santulli argues that the evidence “clearly shows that Appellant had made arrangements to comply with” Condition One, pointing to evidence included in his brief’s appendix showing that he had been released of all dischargeable debts through a bankruptcy proceeding. However, that evidence was not before the Board and, therefore, we may not consider it. See id. (trial court shall “determine from the certified record on file whether or not the Board’s decision is reasonably supported by substantial evidence”). We have already held that the Board’s order was not improperly vague, and the evidence shows that two and one-half years after being given a probationary license conditioned in part on paying or discharging his debts and one year after being given an extension and being told what would be necessary to satisfy the Board’s concerns, Santulli had not made any progress with regard to his debts other than to develop a more concrete intention to file for bankruptcy within a month. We hold that substantial evidence supports the Board’s finding that Santulli violated the conditions of his probationary license. (5)

In his third issue, Santulli attacks the Board’s finding that he lacks the good moral character requisite for bar admission, asserting that the Board failed to prove a clear and rational connection between Santulli’s character traits and the possibility that a client might be injured or that justice might be obstructed. He argues that the Board should have proved that it followed certain mandates he argues were set out in Konigsberg v. State Bar of California, 353 U.S. 252 (1957).

In Konigsberg, the California Bar rejected a bar application in part because the applicant “failed to demonstrate that he was a person of good moral character.” Id. at 259. The Court reviewed the record and the California Bar’s arguments and held that “there is no evidence in the record which rationally justifies a finding that Konigsberg failed to establish his good moral character.” Id. at 273. We do not read Konigsberg as requiring the Board to prove that it conducted a specific four-prong test, as asserted by Santulli. (6) Instead, we read the opinion to require that there be a rational basis for the Board’s order, supported by “some authentic reliable evidence.” See id. Thus, the Board’s order satisfies Konigsberg if it is supported by reliable evidence such that “a reasonable man could fairly find that there were substantial doubts about [Santulli's] ‘honesty, fairness and respect for the rights of others and for the laws of the state and nation.’” See id. at 264; see also Tex. Gov’t Code Ann. § 82.028(c)(1) (West 2005) (Board may not recommend license denial unless it finds “clear and rational connection between a character trait of the applicant and the likelihood that the applicant would injure a client or obstruct the administration of justice”).

In its 2003 order, the Board found that Santulli’s violation of his amended probationary license was “indicative of a lack of trustworthiness in carrying out responsibilities, especially given his prior failure to comply with the conditions of his agreed order with the Board,” and concluded that there was “a clear and rational connection between Mr. Santulli’s lack of trustworthiness in carrying out responsibilities, as evidenced by his failure to comply with condition 1 of his probationary license as amended, . . . and the likelihood that he would harm a client, obstruct the administration of justice, or violate the Texas Disciplinary Rules of Professional Conduct,” and that his “failure to comply with condition 1 of his probationary license as amended is indicative of a lack of the good moral character required for admission.” We must give appropriate deference to the Board’s determination of whether there is a clear and rational connection between Santulli’s financial irresponsibility and failure to meet his obligations under previous Board orders and the substantial possibility of harm to future clients or the obstruction of justice and must affirm if there is substantial evidence supporting the Board’s decision. See Stevens, 868 S.W.2d at 776, 778 (Board has “considerable discretion” in applying admission standards).

The supreme court has held that the ethical standards required for admission to the Texas Bar demand more than “an absence of convictions involving serious crimes and crimes of moral turpitude” or the “mere absence of gross misbehavior.” Id. at 776. Instead, the Board must affirmatively determine that an applicant has the good moral character and is fit to practice law. Id.; see Tex. R. Govern. Bar Adm’n IV(a) (West Supp. 2008). Under the rules governing admission to the Texas Bar, “[g]ood moral character is a functional assessment of character and fitness of a prospective lawyer,” and the purpose of requiring present good moral character is to exclude from bar admission persons with character traits that “are likely to result in injury to future clients, in the obstruction of the administration of justice, or in a violation” of the rules of professional conduct. Tex. R. Govern. Bar Adm’n IV(b). “These character traits usually involve either dishonesty or lack of trustworthiness in carrying out responsibilities.” Id. The supreme court has held that evidence of a “longstanding lack of financial responsibility” may be, on a case-by-case basis, “substantial evidence that [an applicant] suffers from a ‘persistent inability to discharge, or unreliability in carrying out, significant obligations.’” Stevens, 868 S.W.2d at 781 (quoting Tex. Disciplinary R. Prof’l Conduct Terminology, reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G, app. A, art. X, § 9 (West 2005) (defining “fitness”)). “[T]here is a ‘clear and rational connection’ between . . . financial irresponsibility on the one hand, and ‘the likelihood that [an] applicant would injure a client,’ on the other.” Id. (quoting Tex. Gov’t Code Ann. § 82.028(c)(1)).

The 2003 hearing was held more than two years after Santulli agreed to the original order that required him to make payments under his CCCS and student loan debt-management plans. At the time of the hearing, Santulli could do no more than tell the Board that he planned to file for bankruptcy in the next month, which is essentially the same thing he told the Board a year earlier, during the 2002 hearing. In the intervening year, Santulli had not made any payments or made any arrangements to pay or discharge his debts; he “made arrangements” with one lawyer, whom he attempted to contact months later only to discover the attorney had moved away; and he testified that he had hired another attorney one to two months before the hearing but had not yet drawn up a petition or filed for bankruptcy. Santulli did not bring any documentation to the hearing showing that he was in the midst of filing or even preparing to file for bankruptcy, nor did he bring a contract or other proof that he had actually hired the second attorney or that the attorney was in the process of filing for bankruptcy on Santulli’s behalf. We agree with the trial court that substantial evidence supported the Board’s determination that there is a clear and rational connection between Santulli’s lack of trustworthiness or reliability in carrying out responsibilities and the likelihood that he will harm a client, obstruct the administration of justice, or violate the disciplinary rules. (7) See id.; see also Tex. R. Govern. Bar Adm’n IV(b). We overrule Santulli’s third point of error.

Conclusion

We recognize the serious consequences likely to befall Santulli due to the Board’s order. However, we are limited in our consideration of this case to the record that was before the Board when it made its decision and cannot consider evidence that Santulli has since finalized a bankruptcy judgment, nor may we substitute our judgment for that of the Board. Substantial evidence supports the Board’s findings that Santulli failed to comply with Condition One and that his failure to comply with that condition indicates a lack of trustworthiness in carrying out responsibilities. We affirm the order of the trial court affirming the Board’s decision.

__________________________________________

David Puryear, Justice

Before Chief Justice Jones, Justices Puryear and Henson

Affirmed

Filed: April 10, 2009

1. Although the 2001 agreed order is attached as an exhibit to Santulli’s brief, it does not appear in the record. Santulli testified in December 2002 that the original order required him to make payments on his student loans and under his CCCS debt management plan.

2. For convenience, we will cite to the current rules unless they have materially changed.

3. As part of this issue, Santulli argues that the Board made an “impulsive presumption that denies Santulli his Constitutional right to Liberty and the pursuit of the profession of his choice in direct violation of Santulli’s Due Process rights.” However, Santulli did not raise his “impulsive presumption” complaint before the trial court, nor does he provide argument explaining this claim. See Tex. R. App. P. 33.1(a), 38.1(h). Thus, Santulli has not preserved this complaint for our review.

4. We also reject Santulli’s claim that the Board did not set a deadline by which the condition was to be satisfied. The 2002 order states, “Mr. Santulli shall make suitable arrangements for payment or discharge of all of his past due debts during the term of his probationary license.” Thus, the deadline was six months after the original license-expiration date.

5. Santulli also asserts that the order was arbitrary and capricious. In narrowly defined circumstances, an agency decision supported by substantial evidence may be invalid because it is arbitrary. See Texas Health Facilities Comm’n v. Charter Med.-Dallas, Inc., 665 S.W.2d 446, 454 (Tex. 1984); Lewis v. Metropolitan Sav. & Loan Ass’n, 550 S.W.2d 11, 16 (Tex. 1977); Texas State Bd. of Dental Exam’rs v. Silagi, 766 S.W.2d 280, 285 (Tex. App.–El Paso 1989, writ denied) (op. on reh’g). However, “the finding of an act, which is supported by substantial evidence, to be arbitrary and capricious must be based on a violation of due process or some other unfair or unreasonable conduct that shocks the conscience.” Silagi, 766 S.W.2d at 285. There is no due process violation here, nor does the record reflect unreasonable conduct that shocks the conscience.

6. Santulli argues that the Board must “prove that its denial is based upon:

1. Authentic evidence;

2. Reliable evidence;

3. Applicant’s unlawful or immoral actions; and

4. Applicant’s unlawful or immoral actions reflect adversely on Applicant.”

7. We note that the 2002 order, which Santulli did not appeal, included the following language: “IT IS FURTHER ORDERED that any such revocation based on [Santulli's] failure to abide by the conditions of this order shall conclusively establish . . . a lack of trustworthiness in carrying out responsibilities, making it likely that he would injure a client, obstruct the administration of justice, or violate” the rules of professional conduct. (Emphasis added.)

@GetOutOfDebtGuy

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“Dear Steve,

I am disabled and falling in debt faster than i can handle. I am barely staying alive with trying to feed my family. I am behind on my mortgage and regular bills (utilities). I stopped paying on my credit cards just to try and keep my utilities from being disconnected. credit card companys are calling me constantly for there payment. I don’t even have the money to pay the lawyer for claiming bankruptcy. I don’t know where to turn. please help !!

What can I do???

Ed”

The Answer:

Dear Ed,

You’ve done the right thing by stopping payments to the credit card companies. You need to focus your repayment efforts on the mortgage and utilities at this point.

What I don’t know is if you can reasonably expect to be able to afford your mortgage any longer. It might just be that will your reduced income that you can’t afford the home. In that case you should give the home back to the bank and then go bankrupt to eliminate all your past debt, including any money the bank may want from you following the foreclosure of your home. I am assuming that you have little to no equity in your property.

At that point you can stop running for cover all the time and just focus on building a safer financial future for you and your family using what you’ve got coming in each month.

There are self-help bankruptcy materials available and you can usually get free bankruptcy forms from the local bankruptcy court.

If you decide that you can move then you can stop making the mortgage payments to save a rent deposit and to file for bankruptcy. That should allow you to do what needs to be done.

Big Hug!

@GetOutOfDebtGuy

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