Bankruptcy & Debt Relief
Yes, you read that correctly. Consumers are suing debt collectors for violations of the Fair Debt Collections Practices Act and getting protection (and remedies) from harassing and abusive behavior by debt collectors. The Fair Credit Reporting Act ensures that information is reported accurately to credit agencies, and violations raise cause of action against the debt collector AND the credit reporting agency.
See the article at Debt Law Network.
In May of 2009, The Credit Card Accountability Responsibility and Disclosure Act of 2009, or the Credit CARD Act of 2009 was signed by President Obama. The bill becomes effective in February of 2010 and will include protection for credit card holders such as limits on fees and interest charges, use of terms clarified, requirements for how payments must be applied, and protection of young consumers.
I personally, received my first credit card at age 18. It resulted in my first negative credit rating. Honestly, I wasn’t mature enough to handle the responsibility – but even more importantly, I didn’t have the income to take on any debt. The new bill gives special protections for people under the age of 21. They either need a co-signer or proof that there is sufficient income to repay credit. If there is a co-signer involved, there can be no credit limit increases without the co-signers approval.
Right now, credit card companies charge exorbitant amounts for over the limit fees. This often happens to consumers who didn’t even realize the last purchase brought them slightly over their credit limit. The new law will require that any over the limit fee is proportionate to the overage – there can’t be large rate increases for a small purchases that barely brings a consumer over their limit.
Some creditors have been mailing statements late, or changing due dates. Now, statements have to be mailed 21 days BEFORE the bill is due (it used to be 14 days) and there must be a 45 day notice of any change to fees or rates. It also requires that payments over the minimum be applied to the credit card balance with the highest rate of interest (instead of the lowest interest balances).
Consumers have fallen deeper into debt, when they make a late payment and their interest rate sky rockets. The new law requires that under these circumstances, the credit card company must review (AND DECREASE) the interest again after 6 months of paying the minimum balance on time. Also, full disclosure is required – including the true time and cost of paying only the minimum payment.
“Universal default” allowed credit card companies to review a consumer’s credit, and if a consumer was 30 days late on ANY payment (even to another creditor) the consumer’s interest rate could be increased. This bill prevents this from happening.
This is a great step in the right direction. Finally consumers are getting the protection they deserve.
Falling behind on our bills leaves us feeling embarrassed, stressed, scared, and out of control. You have sleepless nights and find that it affects every aspect of your life. It is happening all over America, people are filing for Bankruptcy like never before. In the fall of 2008, Bankruptcy filings in Arizona had increased 87.5% since the year before. It is unfortunate that bankruptcy clients are sometimes viewed as being irresponsible. The truth is, the majority of my clients were faced with unexpected circumstances that left them struggling to pay their debts. Many have lost jobs or had a significant decrease in income. Others have filed for divorce and find that two households are much more expensive than one. Still others have been faced with serious medical conditions and mounting medical bills, or even a death in the family. If you find yourself unable to make even minimum monthly payments on your credit cards, if creditors are harassing you, if you have been sued or your wages have been garnished – bankruptcy may be an option.
A Chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy. In the most basic of terms, when you file for bankruptcy all that you own is considered part of the “Bankruptcy Estate”. A trustee is assigned, and acts with the sole purpose of finding assets to liquidate in order to provide some payment to creditors. Many items are exempt from the Bankruptcy Estate, meaning – you get to keep them. Exemptions vary by state. In Arizona, the important things include: your house (up to $150,000 of equity); if you own a car free and clear $5,000 is exempt from the estate. Your household goods and furnishings, up to $8,000, are exempt. Essentially, in a Chapter 7 case, you get to keep everything you own, and all of your debt is discharged. Some common assets that are not exempt (meaning the trustee would sell) are rental property, timeshares, and land. Speak with an attorney to determine which of your assets would be exempt if you file for bankruptcy.
A Chapter 13 bankruptcy is commonly referred to as a “reorganization” of your debts. A trustee is assigned to your case, and a plan is created to make payments to your creditors. The plan payment will include priority debts such as mortgage arrears; past due taxes, child support, and alimony. The plan payment also will include a payment for your car(s), and administrative expense for your attorney, a trustee fee and finally a percentage of your unsecured debt. After the plan term of three to five years, any unsecured debt left over will be discharged. Current legislation, if passed, will allow judges to modify the mortgage on your primary residence. This will be especially beneficial to those of you whose houses are “upside down” and help you get out from under debt.
A Chapter 11 bankruptcy is commonly used by businesses to reorganize debt. Businesses are able to continue to operate and a plan (approved by creditors and the court) is implemented to repay debts. Certain types of debt are non-dischargeable in bankruptcy, including income taxes, student loans, domestic support obligations (child support/alimony), criminal fines, debts resulting from intoxicated driving, debts incurred fraudulently.
In 2005, The Bankruptcy Abuse Prevention and Consumer Protection Act was passed. Most notable is the new “means test” which was developed to determine if a debtor is eligible for a Chapter 7 or must file a chapter 13. Call an attorney for advice on whether or not filing for bankruptcy is the right choice for you. Other alternatives could include debt negotiation/settlement; and debt consolidation programs. Take the step to give yourself freedom from your worries and know that you are certainly not alone.
ABOUT THE AUTHOR: Alethia M. Scipione is an attorney licensed to practice in Arizona. She practices in the area of bankruptcy and debtor’s rights. If you’d like to discuss your options for debt relief please contact her at 480-553-8700. Or visit her website at www.amslawaz.com. The Law Offices of Alethia M. Scipione, P.C. is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
On April 30, 2009, the US Senate voted against Senate Bill 61. The bill proposed to allow judges the flexibility to modify mortgages for families going through a Chapter 13 Bankruptcy. The bill flew through the House with plenty of momentum, but that momentum failed to carry it through the Senate where it stood at a stand still for months and was finally rejected last Thursday.
Why did it fail? http://www.bankruptcylawnetwork.com/2009/05/02/why-did-cramdown-fail-insurance-and-principal/
http://www.eastvalleytribune.com/story/137588
Check out this article.
Bankruptcy filings increased almost 98% since this time last year! The stress and fear are still there, but you should know, you definitely aren’t alone if you need to file for bankruptcy.
I am new to blogging. I am an attorney in Chandler, Arizona helping people who are struggling with debt. I help them file for bankruptcy – Chapter 7, Chapter 13, and also debt negotiation, debt settlement.
I’m hoping this blog will be a place to update people on whats going on with the firm, with the issues, and maybe just fun stuff too.
HAPPY EASTER!
Alethia Scipione
