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Christopher Todd Morrison, P.C.
Affordable Bankruptcy
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Houston Bankruptcy Blog

Credit card debt rising across the US

Consumers in Texas and across the nation are accumulating more and more credit card debt, according to a new report by CreditDonkey.com. Furthermore, 55 percent of credit card users fail to pay their credit card balance in full each month.

The report found that 83 percent of American adults have at least one credit card and the average credit card user has an individual debt of over $5,300 in 2019. Meanwhile, the total revolving U.S. credit card debt is currently $1.04 trillion, which is a significant jump from the $857 billion racked up in 2013. The report also found that the average interest rate paid by U.S. consumers is 16.46 percent, and adults between the ages of 35 and 65 have the most credit card debt.

Bankruptcy provides special rules for foreclosures.

People in Texas who are facing foreclosure may consider bankruptcy a possibility when no other options are available. The extent bankruptcy can help the foreclosure defendant depends on a number of factors, including the chapter utilized, the amount of arrearages, other debts and monthly income.

In most cases, filing bankruptcy will delay a foreclosure case. Upon filing the bankruptcy petition an automatic stay of execution is granted. Mortgage companies and banks must place a hold on state foreclosure proceedings, including a sheriff's sale. This stay applies in both Chapter 7 and 13 cases. In Chapter 7 cases, a creditor will normally file a motion to lift the stay. This is essentially a court order to permit a foreclosure case to proceed. In any event, the foreclosure case will be delayed a few months.

Discharging student loans in bankruptcy

Debt from student loans can be a huge financial burden, and many graduates wonder if they can discharge this type of debt through bankruptcy. Unfortunately, the answer for most is no, but there are some notable exceptions. This has a lot to do with the Bankruptcy Abuse Prevention and Consumer Protection Act, which exempted both private and federal student loans from bankruptcy discharge. The rationale behind this law is not very clear.

The only way a person may be eligible to discharge student loan debt is to demonstrate that it causes a undue financial hardship. The is referred to in courts as the Brunner standard. In order to meet this standard, the borrower must show that they can't pay their student loans while still maintaining a minimal standard of living. They must also show that this circumstance will last throughout the term of the loan and that they have made a good faith effort to pay off the loan.

The internet is not your friend in Chapter 7 bankruptcy

People who have successfully filed for Chapter 7 bankruptcy feel good about rebuilding their lives and gaining control over their spending habits. You decide you may want to blog about that because it could give others hope.

Be forewarned: When you blog about financial or other personal issues, you can quickly find the internet is a nosey neighbor and an unfriendly gossip.

Refinancing during a bankruptcy

When people in Texas are forced to file for bankruptcy, they tend to find it difficult to apply for refinancing due to the abysmal state of their credit score. Nevertheless, they can still receive refinancing if they manage to follow a few simple steps.

In order to receive refinancing, the first thing a person should do is to convene with their bankruptcy attorney, who should have the entirety of their financial history on record and will be able to offer suggestions with regards to how to best move forward. After meeting with the attorney, the individual seeking refinancing needs to start scouting different creditors to work with, which could come in the form of a mortgage company, a bank or a commercial loan organization.

Foreclosure procedural steps may be a violation of the FDCPA

Debtors in Texas and elsewhere are protected against certain actions of debt collectors. The federal law governing the actions of collectors is called the Fair Debt Collection Practices Act (FDCPA). Recently, the U.S. Court of Appeals for the 6th Circuit determined that the FDCPA prohibits certain activities of the debt collector, including state-required collection activities.

In a Michigan mortgage foreclosure case, a law firm handling the foreclosure was a debt collector for purposes of the FDCPA. Since it was a non-judicial foreclosure, no lawsuit was filed. The debtors disputed the debt and requested verification. Normally, under the FDCPA, a debt collector is required to cease most collection activities upon receipt of a bona fide dispute.

Bankruptcy filings fall, but warning signs linger

Economic indicators in Texas and around the country have been improving steadily in recent years, and this has led to a sharp fall in business and personal bankruptcy filings. Chapter 7, 11 and 13 petitions soared in the wake of the 2008 financial crisis, but they have since fallen by more than 50 percent according to a report on the federal judiciary released by Supreme Court Chief Justice John Roberts on Jan. 8.

However, the figures also reveal that older Americans are filing for bankruptcy in far greater numbers than in previous years. Experts say that these filings are usually prompted by crippling medical bills. The Affordable Care Act was written in part to prevent this type of financial hardship, and it has been somewhat successful in this regard as bankruptcy filings prompted by medical bills have fallen among younger Americans according to the report.

Older Americans more likely to file for bankruptcy

Older people throughout Texas and the rest of America are facing a greater risk of serious financial problems. On the surface, the numbers may seem promising. There were 1.6 million bankruptcy filings in 2010, a number that dropped to 789,000 annually by 2017. However, the overall decline also includes disturbing information about the financial situation faced by Americans over the age of 55. There are a number of factors that may contribute to growing levels of insurmountable debt among older people, especially as the baby boomer generation emerges into retirement.

While only 2 percent of bankruptcy filings in 1991 were made by people over 65, that number climbed to 12 percent between 2013 and 2016. In the same time period, new filings for bankruptcy fell for people aged 54 and younger; however, older Americans saw a sharp upswing in their demographic. There are a number of broad economic reasons that may contribute to these issues. Social Security covers less of the average pre-retirement income than it did in the past, making it more difficult for retired people to make ends meet. While defined-benefit pension plans used to be a featured perk offered by many employers, pensions are now often restricted to investment-style plans.

How to figure out if you have too much debt

If you have debt, you are not alone. Approximately 65 percent of people in the United States pay interest on credit card debt. Having some debt is okay, and it can even be healthy if it is related to some sort of goal, such as earning a degree or owning a home. So, when does it become too much?

Figuring out when enough is enough is subjective. The answer depends on various factors. Here are some pieces of advice to help you determine whether your debt is overwhelming.

Bankruptcy options: Chapter 7 and Chapter 13

When people in Texas face overwhelming debt and are no longer able to make ends meet, they may look for options to find some relief from pending credit card debts, medical bills and other looming obligations. Personal bankruptcy can be an important choice that allows people to move forward to a new financial future. When people file for bankruptcy, they can do so in two forms: Chapter 7 and Chapter 13. There are several reasons why people may choose one or the other.

Chapter 7 bankruptcy is based on liquidation of assets. A bankruptcy trustee directs the selling off of all property deemed non-exempt, and the funds received will go to pay off outstanding debts. The remainder of eligible debt would be discharged by the bankruptcy court. The process is relatively short and is often completed in four to six months. In order to file under Chapter 7, people must pass a means test that compares their income to the median income for others of the same family size in the state. If they make too much to be eligible for Chapter 7, they must turn to Chapter 13.