How Much is Your Personal Injury Case "Worth"?

You will hear many personal injury attorneys talking about how much your case is "worth".  That phrasing is problematic as personal injury awards are meant to redress a harm and put a person back in the position they were prior to the injury.  Thus, your personal injury case is "worth" what it takes to pay for your medical bills, fix your personal property and compensate you for any other losses you sustained (e.g., pain and suffering, lost wages, etc.). 

Because these types of cases are often handled on a contingency basis, attorneys know that the more money an injured party receives, the more money the attorney will receive.  In that sense, a personal injury case has great value for the attorney and might be the reason many of them talk about the "worth" of your case. 

If you suffer damages because of the fault of another, the question you should start asking is, "how much will it take to put me back in the position I was before the accident?"  Early in the process, you will find that this is a very difficult question to answer as medical bills are still being incurred, you may be unsure of your medical treatment going forward, and you may still be dealing with the immediate emotional aftermath of your injury.  As time passes, your damages will become more clear.  You will know the amount of your medical bills, you will know your medical prognosis and you will have time to consider the impact on your life.  Once you know all of this, you can begin to put dollar figures on the amount it will take to compensate you for your injuries.  Any attorney who claims to be able to tell you the "worth" of your case before you know any of this information is likely more concerned with their bottom line than with yours.  

Do I Still Owe a Debt if I Receive a 1099-C?

When a debt is settled or forgiven by a creditor, it is common for the creditor to issue a 1099-C for the amount of the "forgiven" debt (e.g., the amount saved in a settlement with a creditor).  When a consumer receives a 1099-C, they may have to pay taxes on that amount as if it were income (see our other posts on avoiding paying these taxes).  

Sometimes, creditors will issue a 1099-C when a debt has not been settled.  This raises the question, does a consumer still owe a debt after a creditor issues a 1099-C?  Unfortunately, that answer is not clear but a court in California recently addressed that question.  The opinion of the California court is not binding on Colorado courts, but it gives us insight into how courts view this issue. 

In Gugger v. USAA Fed. Sav. Bank (US District Court for the Southern District of California), a consumer (Gugger) received a 1099-C for a debt he owed to USAA Federal Savings Bank (USAA).  Gugger later discovered that USAA was reporting the debt as due and owing to the credit bureaus and filed a suit alleging, in part, that the debt was discharged once the 1099-C was issued. USAA argued that the IRS Code requires creditors to file a 1099-C, even when the debt is not cancelled and asked the court to dismiss Gugger's claims because the 1099-C was not evidence of a discharged debt.

The court in Gugger acknowledged that courts around the country are split on whether a 1099-C discharges the underlying debt. The court pointed to some decisions finding that a 1099-C alone was not sufficient evidence that the underlying debt was discharged. E.g., FDIC v. Cashion, 720 F.3d 169, 179 (4th Cir. 2013).  Other courts have said the exact opposite, that the issuance of a 1099-C does reflect a discharge of the debt.  E.g,, In re Reed, 492 B.R. 261, 273 (Bankr. E.D. Tenn. 2013). 

Ultimately, the Gugger court denied USAA's Motion to Dismiss (i.e., the court said that Gugger would be able to proceed with his lawsuit).  The court's rationale was that a 1099-C can vary in its substance and, in the Gugger case, the creditor has put code "G" in box 6. The analysis of the various codes used on Form 1099-C is beyond the scope of this post but, in general, code "G" means there was a "[d]ecision or policy to discontinue collection." See Department of Treasury, IRS, Form 1099-C (2015)Because of this, the court said that there was some question as to whether the debt was discharged or not. 

Unfortunately, the court found other reasons to dismiss Gugger's case (unrelated to the 1099-C issue addressed here) and the court never gave an answer on whether the 1099-C meant the debt was discharged.  

Given the split among courts as to the effect of a 1099-C, consumers cannot assume that a debt goes away after they receive a 1099-C.  If you are facing collections from a creditor who has issued a 1099-C, call us or another experienced consumer law attorney who can look at the specifics of your case and advise as to the status of your debt.  

E-Cigarette Explosion Lawsuits

As e-cigarettes, vape pens and similar products become more common, so do the injuries and damages caused by the lithium-ion batteries that power those devices.  Because this technology is relatively new, lawyers are working to develop the best strategies for litigating these cases. 

Because cases relating to lithium-ion battery explosions usually involve significant damage to the battery itself, there are unique obstacles to be faced by injured parties and their attorneys.  If you are injured by an exploding battery, how do you identify the manufacturer of the battery?  How do you show that the explosion was not your fault?  How do you proceed with a lawsuit against a manufacturer from another country? 

While these issues can complicate claims made against the manufacturer of an exploding lithium-ion battery, they can be overcome by an attorney with experience in this type of litigation.  If you have been injured by an exploding lithium-ion battery, contact us today to discuss the unique details of your case. 

How Does Bankruptcy Affect my Credit Score?

A common question I get as a bankruptcy attorney is, "how does filing for bankruptcy affect my credit score?"  Unfortunately, as is common with the law, the answer is, "it depends." 

The first consideration is where your credit stands before filing bankruptcy.  If your credit score is 800 and you have never missed a payment, then your credit score will likely drop significantly as you plan for and file bankruptcy.  One of the big reasons for this drop is that you will likely stop paying your creditors prior to filing for bankruptcy.  When this happens, the creditors will report your account as delinquent and your credit score will drop. 

On the other hand, if you are already missing payments and your creditors are reporting your accounts as delinquent, the filing of bankruptcy will stop this negative reporting and, upon the conclusion of your bankruptcy, your credit will begin to improve as time passes. 

Another big consideration is your debt-to-income ratio.  Before your credit score really comes into play, your credits will look at your debt-to-income ratio. If your debt to income ratio is too high, creditors are unlikely to lend to you, no matter your credit score.  Upon receiving your bankruptcy discharge, your debt-to-income ratio instantly improves.  

After bankruptcy, your credit score will improve with time.  How quickly your score improves depends on a number of factors including your credit history and your post-bankruptcy actions (e.g., obtaining new credit, making payments on time).  

Many people have misconceptions regarding the impact of bankruptcy on their credit and, many times, their fears are unfounded.  If you're considering bankruptcy in Colorado and are worried about how it will affect your credit score, give us a call and you can discuss your specific situation with a knowledgeable bankruptcy attorney.  

Debt Settlement vs. Bankruptcy

Is it better to settle your debts or file bankruptcy?  As with most legal issues, that greatly depends on your specific circumstances but this article will address when debt settlement may be a viable alternative to bankruptcy.  

Some debts are much easier to settle than others.  For instance, credit card companies will usually settle for a decent discount while medical creditors usually offer a much smaller discount.  You may get a very large reduction on a debt associated with a repossessed vehicle while a local plumber may offer you no discount at all.  

Another factor is the stage at which the collections are at.  If the debt is recent, a creditor may be unwilling to settle as they still have hopes of collecting in full.  For debts that are many years old and are approaching the statute of limitations, the creditor could be willing to offer a significant discount.  

Finally, and maybe most important, are the financial circumstances of the debtor.  If a debtor owns a home and has a good job, it may be more difficult to settle a debt because the creditor will believe they can be paid in full.  On the other hand, if a debtor has no job and minimal assets, a creditor is much more likely to accept a smaller settlement.  

Because there are so many factors involved with debt settlement, it is wise to consult with an experienced debt settlement attorney before giving any information to creditors.  At Aguero Law, we will analyze your financial situation during a free initial consult and will discuss whether a settlement plan is a viable option for you.  We have helped many clients avoid bankruptcy by working out acceptable settlements and/or payment plans with creditors.