Christopher Todd Morrison, P.C.
Affordable Bankruptcy

Houston Bankruptcy Blog

Federal rule may help consumers seeking redress from banks

Consumers in Texas will soon find it easier to file lawsuits against banks or credit card companies as part of large, class legal actions. The Consumer Financial Protection Bureau issued a new rule on July 10 that stops these consumer finance corporations from using arbitration clauses to prevent such lawsuits.

The use of the clauses require individuals to pursue any legal action alone. They mandate that any disputes must be handled in private mediation actions rather than in a public court case, which eliminates the potential of a class-action suit. The CFPB rule aims to allow consumers who suffer joint harms to be part of collective actions in the courtroom.

Have you been thinking about filing Chapter 7 bankruptcy?

Personal bankruptcy filings have been increasing. According to statistics from the United States bankruptcy court, over 1.5 million people file annually. You may be considering resolving your debt problems this way, and clearly you are not alone.

The statistics show that almost 97 percent of all bankruptcy filings are made by individuals rather than businesses, and for personal filings, Chapter 7 is the form used most often. Here are the main reasons that people consider this method for ridding themselves of crippling debt:

Multiple houses not an abuse of Chapter 7

Texas residents may be interested in a bankruptcy case in which the trustee accused the debtor of abusing the process in order to alleviate his debt. The court ultimately decided in favor of the debtor, claiming that paying the expenses of two homes did not constitute abuse.

The trustee in this case did not presume that the debtor filed in bad faith, or that his abuse of the law was intentional. Instead, the trustee argued that the debtor could have repaid his creditors if he sold one of his residences and instead filed for Chapter 13. Income in this case was not the issue, but the trustee attempted to argue that the totality of the debtor's financial circumstances, including his assets, violated the spirit of the law.

Secured creditors must file Chapter 13 claims on time

A bankruptcy court has ruled that secured creditors must file proofs of claim on time if they choose to file them. The specifics of the ruling may be enlightening to Texas residents who have filed for Chapter 13 bankruptcy protection. Chapter 13 gives individuals who have a regular source income the opportunity to restructure and relieve debt without requiring them to give up their property. Debtors must provide the court with a plan to repay debts using future income.

In an Ohio case, a limited liability company had a claim against a married couple who had filed under Chapter 13. It had a lien on the couple's home due to the couple's real property tax debt. Despite having notice of the deadline date for filing proofs of claim, the company failed to file on time.

Fed's rate increase will affect credit card users

Texas consumers are likely to see monthly debt service payments increase following an interest rate hike by the Federal Reserve. Homeowners, home equity borrowers and individuals who use credit cards will pay more for their revolving loans as a consequence of the quarter-percentage point increase of the short-term key rate.

A certified financial planner opined that the interest rate change might alter debt-repayment strategies. It might make sense to pay down variable-rate debt faster, she said, or refinance it to avoid increased interest payments. The interest rates associated with credit cards, home equity lines of credit and adjustable-rate mortgages are all influenced by the Federal Reserve's key rate.

Possibilities for discharging student loan debt

Texas residents may have heard that student loan debts cannot be discharged. However, there are some unusual circumstances in which this may be possible. For example, if a school closes while a student is enrolled or within 120 days of the student leaving the school, the student loans may be discharged. Another unusual situation is if the college is found to have violated state laws. It is necessary to prove that the violation was related to the student's education or loans such as taking out loans based on deceptive information.

A discharge for unauthorized payment or false certification may apply in several situations. If there was identity theft or the school signed a student's name without permission, the debts may be discharged. This is also true if a person did not meet the criteria for receiving a student loan but the school granted it anyway or if someone cannot work in the field trained for at the school because of a criminal record, a physical condition or for another reason. If a school failed to pay a refund to a lender or the government, there could be a partial discharge.

Options for consolidating credit card debt

Texas residents who are struggling with credit card debt but still have good credit might consider a no-interest balance transfer credit card to consolidate their debt. Another consideration might be getting a personal loan if the interest rates are lower. They could also apply for a home equity loan or line of credit.

Interest rates for a home equity loan may be both low and tax deductible. However, it can put the borrower's house at risk of foreclosure. Repayment terms can be a decade or more, and if the value of the home drops, the owner might end up owing more than it is worth. Furthermore, it may be easier to get rid of credit card debt with bankruptcy.

Medical debt can be conquered under the Bankruptcy Code

There seems to be some sort of impression on the internet that bankruptcy follows some kind of lavish spending spree that got out of hand. While oppressive credit card balances can cause a great deal of strife, most consumers work hard to manage their bills. The days of cash only purchases, or the use of a checkbook on a daily basis with the regular balancing process, have given way to the use of plastic.

Debit cards and credit cards are frequently the only access to currency many consumers have in their wallets. Smartphone technology is also replacing cash. Alongside these day-to-day processes, consumers live in a fluid economy. The loss of a job, a reduction in hours, divorce and myriad other factors may place pressure on a household budget. However, medical debt remains a substantial factor in the need for many consumers to seek debt relief under the Bankruptcy Code, according a recent account in USA Today.

Bankruptcy: A tool to help you regain control of your finances

If you're thinking of filing for bankruptcy, don't be ashamed. Declaring bankruptcy can wipe the slate clean and give you the fresh start you need to manage your finances. Learn how you can use bankruptcy as a tool to become debt free and develop positive habits.

Bankruptcy helps you face your debts and develop a plan

Judge rules on Chapter 13 payment plan modification

When Texas residents pursue Chapter 13 bankruptcies, their court-approved payment plans may be modified in certain situations. Some courts have ruled that such modifications require a substantial change in circumstances, but a judge on the U.S. Bankruptcy Court for the Western District of Arkansas found that only two circuit courts have addressed this issue. The case involved a couple who requested a modification after surrendering a financed vehicle, and the judge ruled on May 26 that a substantial change in circumstances was not needed.

The couple's Chapter 13 bankruptcy plan called for payments of $605 per month. More than half of this money would be used to pay down an auto loan, and the balance would then be distributed by the bankruptcy trustee to the couple's unsecured creditors on a pro rata basis. The couple petitioned the court to allow them to return the vehicle to the lender and asked that any resulting deficiency be treated as an unsecured debt.