Consumers who have been making at least minimum monthly payments on their credit cards may be curious about how new changes in the law might affect them. Regulations restricting credit card issuers go into effect on February 22, 2010. Credit card companies are constantly monitoring the credit reports of their customers and would increase interest rates based on overall credit scores. While this new law will not completely eliminate increases in interest rates, their ability to increase interest rates on existing balances would be limited. The rates would only increase in cases where a promotional rate ends, the card has a variable rate or the cardholder makes a late payment. Interest rates on new transactions can only increase after the first year. In addition, interest rates on existing balances cannot be increased because of “universal default” on other credit accounts prior to forty-five days of notice.
While interest rates themselves would not be limited, the restrictions on rate increases might cause card issuers to make demands on payment sooner and therefore force their account holders into bankruptcy. Cardholders are also given under the new rules at least twenty-one days to make payment before incurring default. Card would have to enabled to allow for over-limit spending, which would otherwise be prohibited. Card applicants under the age of twenty-one would be required to have an adult co-signer on their account if they lack the income to make regular payments.
Basically, the new law just means that credit could be harder to come by and also incentivizes people to pay off their balances quicker rather than postponing their agony and thereby allowing the interest rate to ride up on their existing balances.
Disclaimer: This does not constitute legal advice. Please consult a qualified bankruptcy practitioner in your jurisdiction on how and if the above law may affect you.
February 4th, 2010 by Administrator
Short sales (selling a home for less than its value) and foreclosures, are more common these days, but are not necessarily the right prescription for homeowners facing decreasing property values, especially when the borrower can continue to afford mortgage payments. A recent article, expresses surprise at homeowners facing responsibility for a loan deficiency. This result is the combination of the poor real estate market and lenders’ need to enforce the terms of their original contract.
Simply put, a short sale with a release of title is not enough. A release of any loans owing on the property needs to be negotiated as well or the short sale is little more than a foreclosure in practice. Former property owners whose homes were foreclosed upon even several years prior would be well-advised to carefully review their credit report in order to determine that they still do not owe for such accounts. A qualified real estate attorney in your area should be able to inform you of your liability to pay a loan after short sale and may refer you to a qualified bankruptcy practitioner who can help you possibly discharge or at least work out this debt.
February 3rd, 2010 by Administrator
Potential bankruptcy filers who are working should be aware of any court actions against them and what the current status of those actions are. The reason is that any lawsuits may after service upon the named defendant be brought to judgment, even if the case is contested. Once a lawsuit has been brought to judgment, it is only a matter of time before the collection lawyers receive a court order for attachment on the defendant’s wages. This defendant then would want as soon as possible before having their wages garnished to be a bankruptcy debtor in order to discharge the debt that is the subject of the lawsuit. Named defendants in such cases want to be sure that the appropriate civil procedure for the jurisdiction has been followed as regards service of process upon them and their answer to the complaint. A qualified bankruptcy practitioner in their jurisdiction can then help the defendant get a discharge as a bankruptcy debtor.
January 19th, 2010 by Administrator
The question of whether a particular debt is dischargeable may arise with domestic support obligations. These debts include not only child support and alimony, but could also include a credit card balance required by a family court order to be paid by a person. This account would be listed as an unsecured priority debt on Schedule E of the bankruptcy petition and would not be dischargeable in bankruptcy. The reason is that an existing family court order not yet modified otherwise cannot be vacated by a subsequent bankruptcy filing. Of course, this is a general principle as family law varies widely from one jurisdiction to another. Consult first with a licensed family lawyer in your jurisdiction and then with a qualified bankruptcy practitioner in the area in order to determine your rights.
January 19th, 2010 by Administrator
Debtors concerned about their ability to pay off debts often wish to add as many accounts as possible to their bankruptcy petition. They believe that they have to do so if they do not have the financial means to pay off the total balances owed. However, there is a viable option on debts that are secured by property, known as collateral. Usually, mortgages and car loans that are reaffirmed need to continue being paid on their original terms. However, other secured lien holders, like furniture stores, may be willing to reduce the total balance owed and enter into a redemption or reaffirmation agreement with the debtor. The debtor gets to keep what they bought while paying the store a reduced amount they are better able to afford. A qualified bankruptcy practitioner in your jurisdiction can communicate with such creditors on the debtor’s behalf in order to achieve a solution where all parties come away with something.
December 18th, 2009 by Administrator
While pension and other retirement accounts are exempted by 11 U.S.C. s. 522(d)(12), debtors should be aware that the money they have in such accounts can be used to satisfy any amounts they may have to pay to their creditors after the trustee’s investigation. As long as the debtor is able to take this money out, these funds might relieve penalties for prepetition transfers or other property alleged to be in the debtor’s estate. And of course, freeing up part of the funds available in a retirement account does not completely halt the debtor’s retirement savings planning. Be sure to consult with a qualified bankruptcy practitioner in your jurisdiction as regards the ability of a pension or retirement account to qualify for an exemption under the appropriate federal or state law.
December 11th, 2009 by Administrator
After the 2005 changes in bankruptcy law, many potential debtors have been concerned about not qualifying for a Chapter 7 discharge because of a high level of household income. While the median household income levels are an initial hurdle to be overcome in the process of discharging debts, means testing is an available option for families to avoid the presumption of abuse that would otherwise exist. Part V of the Chapter 7 statement of current monthly income and means-test calculation is the calculation of deductions from income and is the primary way for the higher-income debtor to qualify for discharge. Subpart A under this section are allowable federal tax deductions. These include national standards for food, clothing and other items and health care based on age seniority. The local standards under the tax deductions would include housing and utilities and non-mortgage, mortgage and rent expenses; transportation and vehicle operation/public transportation expense and transportation ownership/lease expenses for all vehicles operated by debtors. Even if you don’t pay a car loan, you would still have transportation expenses for gas, maintenance and insurance. The other necessary expenses under this subpart would be taxes; involuntary deduction for employment; life insurance; court-ordered payments; education for employment or for a physically or mentally challenged child; childcare; health care and telecommunication services. The last category would only be telephone or internet to the extent necessary for your health or welfare or that of your dependents. Subpart B of additional living expense deductions would include health insurance, disability insurance and health savings account expenses; continued contributions to the care of household or family members; protection against family violence; home energy costs; education expenses for dependent children less than 18; additional food and clothing expenses and continued charitable contributions while Subpart C of deductions for debt payment would include future payments on secured claims, other payments on secured claims and payments on prepetition priority claims. The last category includes the domestic support obligations of child support and alimony trustees usually ask debtors about at the creditors’ meeting. The total deductions from income in Subpart D allows the debtor to overcome the presumption of abuse even with an over-median level household income. Particularly when it comes to the median household income levels in your area as well as the local standards used for tax deductions, consulting with a qualified bankruptcy practitioner in your jurisdiction is vital.
December 11th, 2009 by Administrator
It is easy to take stock of what we have at home and place a value on it. But it requires more thought to consider property we may have – including inheritances for estates not yet probated and money owed to us for claims. Inheritances are liquidated as we know the amount out of the estate we expect to receive. It is more difficult to place a value on the contingent unliquidated claims, to use the language on Schedule B of personal property. Rarely do claims for personal injury arising from accidents, for example, settle quickly and often there is a wide disparity between what a client expects to receive and what the claimant’s attorney actually anticipates the case to be worth. The estate’s probate lawyer or the personal injury attorney can best provide the valuation of such intangible property in the debtor’s estate. But only a qualified bankruptcy practitioner can ensure that the debtor’s interest in this property is protected to the extent possible, using the applicable exemptions in their jurisdiction.
December 10th, 2009 by Administrator
The new bankruptcy law encourages potential filers to consider alternatives to bankruptcy. Debtors often do try out private credit consolidation before failing and seeking bankruptcy relief. Under the current law, debtors whose income is too high above the median level for their household size to qualify for a discharge of their debts would have to file a Chapter 13 petition for reorganization if they seek bankruptcy relief. A Chapter 13 petition allows the debtor to keep any assets but provides for repayment to creditors through a court-ordered payment plan based on the difference between the debtor’s income and expenses. This is in one sense similar to private credit consolidation, in which a third-party agent negotiates repayment terms with all creditors while accepting a lump sum monthly payment, including their agency fee, from the debtor. Such payments are often automatically deducted from the debtor’s bank account in order to ensure receipt. Debtors need to affirmatively indicate to the credit consolidation company their desire to terminate such payments, as when they are ready to file bankruptcy. Credit consolidation might temporarily halt an increase in interest and penalties, but these would be permanently eliminated by the Chapter 13 plan, which allows the debtor to pay the total balance owed at the time of filing. Definitely consult with an experienced Chapter 13 practitioner in your jurisdiction in order to determine whether your over-median household income might be a reason to consider Chapter 13 bankruptcy rather than credit consolidation.
December 2nd, 2009 by Administrator
A recent 1st U.S. Circuit Court of Appeals decision allows late payment penalties imposed on untimely alimony payments to not qualify as a domestic support obligation and therefore be dischargeable. The decision in In Re: Smith, Nelson J. (Docket No. 09-9005), an appeal from the Bankruptcy Appellate Panel for the 1st Circuit, found that “the late fee was intended to encourage payment of alimony and was not itself alimony . . . Since (obligee) had no expectation of this payment unless and until (obligor) was late, it follows that the only way this contingent payment could be considered alimony is if it was meant to compensate (obligee) for the time during which she was waiting for her alimony payment.” This late payment penalty was a fixed fee and “had the parties provided for an interest-bearing fee, contingent on the amount of alimony outstanding, (obligee) would have a stronger argument.” In fact, the penalty was also separate from the costs of a contempt action as “legal fees incurred in enforcing the agreement, a provision not always contemplated in such contracts, were clearly provided for in this instance.” While this decision is only applicable to cases filed within the 1st Circuit’s jurisdiction, a qualified bankruptcy practitioner in your area can clarify for you whether or not a particular debt owed would be considered a domestic support obligation for the purposes of dischargeability.
November 30th, 2009 by Administrator
