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Cincinnati Bankruptcy Law Blog

Bankruptcy is more beneficial than what myths make it out to be

Ohio consumers who are burdened with unmanageable debt may be exploring remedies to relieve the stress of creditor harassment and other actions. Knowledge is power, and consulting with an experienced bankruptcy attorney may provide the information necessary to make informed decisions. A lawyer may also dispel some of the myths about bankruptcy.

One misconception about bankruptcy is that the filer will lose everything. The truth is that, although Chapter 7 is known as the liquidation bankruptcy, exemptions exist, and assets required for a basic living will not be sold at auction. All assets are retained in a Chapter 13 bankruptcy. However, consumers must not expect all of their debts to be discharged. Bankruptcy will only discharge unsecured debts such as credit card debt and medical debt, but unpaid taxes, child and family support and student loans -- except under specific circumstances -- will remain the filer's responsibility.

Hoping to sell -- Hastings files for Chapter 11 bankruptcy

Hastings Entertainment -- a retail chain selling books, music, video games and movies at 126 locations in various states, including in Ohio -- has announced that it is seeking potential buyers. The company recently filed for Chapter 11 bankruptcy, seeking protection while waiting for interested purchasers. It will keep the doors open for another 30 days in anticipation of an offer.

Chapter 11 bankruptcy is a tool that allows businesses that are experiencing significant financial problems to reorganize their finances while maintaining operations. The company hopes to find a buyer to take over and keep the business going. However, it said that failure to sell would force the closure of all 126 stores or corporate downsizing.

Bankruptcy: Prioritize life's essentials in difficult times

Some Ohio consumers who are struggling to pay their bills find it difficult to prioritize which debts to pay first. Financial advisors suggest consumers pay those items that are essential in their lives. Typically, a roof over one's head is most important -- regardless of whether it is a mortgage or rental payment to be made. The second most important item is transport -- especially if a person needs a car to get to work. If there are no funds to pay these essentials, it may be time to consider bankruptcy.

Auto loans and mortgages are secured debts that are typically needed for basic survival. Foreclosure or eviction and repossession may result if these payments fall behind. Other essentials include food and utilities, and it may be necessary to cut down on take-outs and cook at home in order to keep the heat and lights on. 

Consider bankruptcy before draining retirement funds

Ohio consumers who are facing overwhelming debts might share the opinion that debts must be paid at all costs. It is often said that all avenues should be tried before filing for bankruptcy, though the most sensible remedy may be to file for personal bankruptcy before all assets such as retirement accounts are drained. Why would a consumer expose him or herself to debt collectors and other creditor's harassing actions rather than opt for the protection of bankruptcy?

The effect that bankruptcy has on a filer's credit score is often cited as the reason not to file. In most cases, by the time a person files for bankruptcy, all the past-due debts have already affected his or her credit score. There are certain fees to pay in connection with a bankruptcy, and it may be unwise to wait until there is no money left to file. Once consumer debts have been discharged in bankruptcy, it typically has a positive effect on his or her credit score.

Personal bankruptcy can provide a fresh financial start

Filing for bankruptcy in Ohio is a complicated process and may be best navigated with the guidance of an experienced bankruptcy attorney. He or she can explain the pros and cons of the different types of bankruptcies -- called chapters. Individuals typically have to do a means test to determine whether they qualify for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 brings debt relief within months, while Chapter 13 takes between three and five years.

Chapter 13 bankruptcy is suitable for individuals who have fallen behind on car or mortgage payments and need extended time to pay it off. Most of their debts may be non-exempt such as child support or student loans, and they may not want to risk losing assets such as a car or jewelry. This chapter involves drawing up a court-approved reorganized payment plan to settle debts over a period of three to five years.

Filing for bankruptcy may be a complicated process

Job loss is not something wished upon anybody, and the financial stumbling blocks may be overwhelming. Even if expenses are cut to the absolute minimum, with no income, there may be no money to cover debt obligations. The U.S. Bankruptcy Code may offer an Ohio consumer the opportunity to have some debts discharged, allowing him or her to regain financial stability. Filing for bankruptcy, however, is not an option to choose without being fully informed of the pros and cons.

All options must be explored, and if bankruptcy is the choice, a means test must be completed that will compare the individual's income and debts to determine whether Chapter 13 or Chapter 7 would be the appropriate solution. All financial information must be gathered, including assets, income records over the past six months, all outstanding debts and more. A credit counseling program must be attended in the six months prior to filing for bankruptcy.

Personal bankruptcy can put a stop to foreclosure

Foreclosure is not something that is wished upon any property owner, and Ohio homeowners may not realize that lenders do not usually start such drastic actions for a single late payment. A late payment notice may be sent, and if it remains unpaid, the mortgage holder may try to make contact to arrange negotiations to reach an agreement that may help the homeowner to bring payments current. Only when no solution can be found will foreclosure proceedings be set in motion.

During a foreclosure, generally, the lender takes ownership of the property and sells it at an auction. The proceeds are then used to pay the outstanding mortgage. The legal procedures related to foreclosures vary in different states, but the general pattern is similar. The lender will advise the property owner of its intention to foreclose before filing the request in court.

Ohio consumers: Beware of creditor harassment by fake companies

Ohio consumers with past-due debts may have to endure many associated hardships. Even in cases in which payment agreements have been reached with creditors, debt collectors may become nuisances. In many cases, creditor harassment is committed by non-licensed companies that have no right to call consumers, and the calls often involve nonexistent debts.

A consumer in another state recently reported that she was the victim of such harassment about debts she did not owe. Reportedly, a voice message was left informing her that legal action would be taken should she fail to call back that day to arrange payment of the outstanding debt. When she called back, she was refused any information about the company and the alleged outstanding debt; however, immediate payment was demanded.

Bankruptcy and new habits may provide financial stability

Ohio consumers who are fighting a battle against overwhelming credit card debt may find comfort in learning that remedies are available. Some believe that many people's financial problems are caused by a few bad spending habits. Habits are hard to break, and recognizing the problem may be a good start. It may be necessary to go through personal bankruptcy before starting fresh with healthier money habits.

While automating payments is a good way to ensure that all payments are made on time, many consumers who use automation then stop reviewing their credit card statements. Special settlement offers or incorrect charges that are missed can have an adverse impact on a person's financial health. Paying only the minimum required amounts on credit cards is another bad habit that leaves a consumer stuck with debts for many years because only the interest is paid without reducing the principal amount.

PacSun chooses protection of Chapter 11 bankruptcy

Following the spate of clothing retailers to file for bankruptcy, PacSun -- a retailer of surfwear with about 600 stores nationwide, including in Ohio -- is the latest to follow that route. The retailer filed for Chapter 11 bankruptcy, announcing that it was a well-planned move to reorganize and restructure the company. Raised levels of competition and the increased popularity of online shopping were cited as part of the reason for the company's failure to show profits in recent years.

Filing for bankruptcy was in no way a negative move. With the protection of the U.S. Bankruptcy Code, the retailer was able to negotiate a deal with a private-equity firm to swap debt for equity that will provide the company with additional capital of about $20 million when it emerges from bankruptcy. To help fund the reorganization, Wells Fargo has also agreed to a $100 million loan.

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