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Cincinnati Bankruptcy Law Blog

The desired result may not follow a DIY bankruptcy filing

With the availability of online options and do-it-yourself instructions for just about every procedure, Ohio consumers who are experiencing financial problems may choose to search for remedies online. Online instructions may not cover all eventualities, and for a process such as a bankruptcy filing, obstacles may arise that need professional assistance. A skilled bankruptcy attorney can explain the pros and cons of all debt relief options and compare them with those of personal bankruptcy.

If the consumer decides to file for bankruptcy, legal counsel can help with filling out complicated forms that require financial information in very specific formats. There will be creditor's meetings at which tricky questions might be asked, and the presence of an attorney can be helpful. He or she can explain all the bankruptcy rules and their intricacies that online instructions might not include. Only full understanding of all the details about Chapter 7 and Chapter 13 bankruptcy can allow the consumer to make informed choices.

Bankruptcy: Which debts qualify as priority debts?

When the debts become overwhelming, Ohio consumers may have questions about their options. While bankruptcy is likely the most appropriate way to achieve financial relief, some so-called priority debts are not dischargeable. These include secured debts such as car loans and mortgages that are secured by property that creditors can repossess to cover unpaid amounts. In Chapter 13, payments can continue as part of court-approved restructured payment plan. However, unless a Chapter 7 filer can catch up with unpaid amounts, and maintain payments after completing the bankruptcy, those assets may be liquidated.

Other debts that the liquidation of assets will cover include any fees outstanding to government units such as penalties, speeding fines, vehicle registration and tax penalties. Government funded student loans are not dischargeable, with some exceptions, though if the consumer can prove undue hardship -- which is extremely difficult to establish -- the loan might be discharged. Also, an individual must repay any overpaid government benefits such as unemployment. If the person cannot pay it back, it will become a debt not subject to discharge. When it comes to a loan from a 401(k), that is actually a debt to the individual, and Chapter 7 does not provide for its forgiveness.

Bankruptcy vs. other debt relief options

The tremendous amount of credit card debt in the country is not only a national problem, but it also affects the lives of many consumers in Ohio. While bankruptcy is a viable option, consumers may want to compare the pros and cons of it with other debt relief options. The most appropriate first step is to make a list of creditors and the amounts owed to them.

To make an informed choice, a consumer must learn the unique aspects of each option. Some require the consumer to take out a loan, and homeownership might be necessary for security. Solutions exist for those whose debts are still manageable, and for those with overwhelming debt, more drastic and aggressive remedies are available.

Bankruptcy vs. debt negotiation -- myths and truths

Ohio consumers who have accumulated levels of credit card debt with which they feel uncomfortable may be looking at the available debt negotiation options. While some possibilities can be useful, the myths that surround this subject makes it difficult to make informed decisions. After considering all the choices, it may be wise to compare those with the protection offered by the federal Bankruptcy Code.

It is a myth that all debt negotiation companies are dubious; many are reputable and committed to relieving consumers' debt problems. Some belief that debt negotiation will remove all debt while taxes; however, alimony, child support and certain other debts cannot be resolved in this process. Furthermore, it is also a myth that debt negotiation will remove negative reports from a person's credit record.

Bankruptcy myths of which to take note

Ohio residents who have lost their jobs, incurred unanticipated medical expenses, gone through divorce or any other significant financial hardships may be considering their options. While personal bankruptcy may be the better choice for many -- considering the protections offered by the federal Bankruptcy Code -- many misconceptions or myths are linked to bankruptcy proceedings. The first myth is that bankruptcy ruins the filer's credit record forever. That's not true. In fact, any other debt relief option could also adversely affect a consumer's credit score; moreover, offers of secured credit cards may arrive within as little as one month following a discharge in bankruptcy.

Another misconception is that bankruptcy will eliminate all debts. Personal bankruptcy discharges unsecured debts such as credit cards and medical debts. Child support, student loans, taxes and other debts will still be payable; however, with the lesser burden after the discharge, funds may be available to pay nondischargeable items. Some consumers go on spending sprees before filing for bankruptcy, thinking that those debts will be discharged. However, the bankruptcy court may regard such actions as fraudulent that is not dischargeable in bankruptcy.

Bankruptcy protection could lead to financial stability

Ohio consumers who have fallen on hard times due to any of the various unanticipated twists and turns life can dish out may be looking for ways to regain financial stability. Bankruptcy is often the most efficient way to achieve that. Knowing the consequences of filing for bankruptcy can help consumers determine if it is the best option for their circumstances.

Most people first try several other ways to achieve debt relief, often causing them to get deeper into debt while enduring harassment by debt collectors. Moreover, attempts to negotiate repayment plans directly with creditors may not solve the problem. If one's liabilities substantially exceed available assets, settling the full amounts of the debts will likely be out of the question. Some are afraid that a bankruptcy petition may cause them to lose their IRAs, but creditors can lay no claim to individual retirement accounts.

Bankruptcy vs. personal loan to refinance credit cards

Consumers nationwide, including in Ohio, can be the victims of life's unanticipated twists and turns. Job losses, car accidents or other unexpected occurrences can ruin any consumer's budget in the blink of an eye. In many cases, consumers have no emergency funds, and the only answer is to use credit cards. This sets a debt spiral in motion as unpaid credit card debt is difficult to overcome, and bankruptcy may be the only solution.

However, other options can be explored -- one of which is refinancing of credit card debt. This alternative may bring debt relief under certain circumstances. If a consumer juggles the payments of multiple credit cards with varying interest rates, taking out a personal loan with a lower interest rate may be an appropriate choice. If a consumer can pay off the existing credit card debt within one year, a loan may not be the most suitable option because it will keep the person paying for three to five years.

Debt collector seeks $275 for $75 outstanding bill

Sometimes, small mistakes can turn out to cause significant damage to a consumer's credit. Every time a creditor sells an unpaid debt to another collection agency -- which is quite common -- it may show as a separate debt on the individual's credit report. Consumers in Ohio must know their rights, including what behavior of a debt collector is illegal.

An example is a social media post that recently went viral and indicates how vulnerable uninformed consumers can be. The individual claimed to have canceled all relevant services upon relocation but overlooked a garbage collection service charging $25 per month. That bill accumulated and when it reached $75, the service provider sold the debt to a third party. The consumer received a phone call from this party, claiming payment of $275; when she hesitated, the collector dropped the amount to $140.

Can small business bankruptcy prevent closing the doors?

Many small business owners in Ohio open their new ventures with high expectations of success. Unfortunately, unforeseen circumstances sometimes lead to financial difficulties that are insurmountable. While small business bankruptcy is an option, deciding which bankruptcy chapter would be the most appropriate filing can be challenging.

The first option to consider is liquidation through Chapter 7 bankruptcy. After the sale of business assets at an auction to raise funds for creditors, remaining unsecured debts will be discharged. In most cases, it will lead to the closing of the business. However, if the requirements for filing Chapter 7 bankruptcy are not met, other options must be explored.

Excessive interest on store credit cards can lead to bankruptcy

Some consumers in Ohio have accumulated mountains of debts on store credit cards, and with the holiday shopping season coming up, there will once again be many tempting offers. Signing up for these credit cards typically includes irresistible rewards, and the marketers advertise the benefits in bright lights but never mention the negative aspects of the offers. Many a bankruptcy filing has followed overwhelming store card debt.

The banking industry says approximately 50 percent of credit card users pay their balances in full every month. The other half carries balances over from month to month. Some of these consumers may unintentionally land in a debt spiral. The interest rates on store cards are exceptionally high, with an average of approximately 24 percent -- compared to an average of around 15 per cent charged on other credit cards.

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