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Cincinnati Bankruptcy Law Blog

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.

Can anybody file for Chapter 7 bankruptcy?

Although the intention of the U.S. Bankruptcy Code is to give consumers in Ohio and other states the opportunity to regain financial stability, it also wants to make sure that those who can pay at least some debts do not get them all discharged. That is the difference between Chapter 7 and Chapter 13 bankruptcies. Chapter 7 calls for liquidation of some assets to pay creditors and the discharge of unsecured debts, such as medical and credit card debts. Chapter 13 allows those with a regular income to reorganize their payments into a court-approved payment plan that allows a period of between three and five years to pay debts before remaining balances are considered for discharge.

Consumers must complete a means test to determine eligibility to file for Chapter 7 bankruptcy. A person will qualify for Chapter 7 if his or her income does not exceed the required amount. This is typically based on the median income of others in the filer's state. Any person who does not earn a regular wage that would enable him or her to make some payments can file for Chapter 7. However, if an individual has had debts discharged in Chapter 13 within the most recent six years or in Chapter 7 bankruptcy in the past eight years, the filing will not be allowed.

Steps can be taken to avoid bankruptcy by reducing business debt

Entrepreneurs in Ohio who established small businesses with great intentions and high hopes of success will naturally be devastated if financial difficulties become overwhelming. While their first inclination may be to file for bankruptcy to eliminate business debt, it may be best to first consider other available options. Important decisions are always better made once all the relative information is available and the pros and cons of each choice are carefully evaluated.

Although bankruptcy can be the ideal remedy for some, the long-term consequences may be avoided by taking proactive steps. These may include negotiations with creditors. Offering the business owner better payment terms will ultimately benefit creditors who may lose more if bankruptcy is filed. Another vital step to take is to scrutinize every single purchase made by the business to identify areas that are leaking money. By purchasing only essentials and being frugal, entrepreneurs may be surprised by the positive results that may even prevent bankruptcy.

Careful consideration may be needed before filing for bankruptcy

Some Ohio consumers are overwhelmed with debts that may have resulted from unanticipated medical expenses or job losses that left them no option but to finance their daily living expenses through credit cards. While filing for bankruptcy may be the most appropriate route to go, it is a drastic step that needs careful consideration. Individuals may want to gain all the relevant information to enable them to make informed decisions that may determine financial stability in the future.

When filing for bankruptcy, the consumer will have to provide the court with details of every asset he or she has along with all outstanding debts. The court will then divide assets into those that are exempt and those that are non-exempt. The latter include assets such as second homes or vehicles and valuable collections that can be taken to cover debts. Equity on the family home, an automobile, and personal items are exempt and may not be seized.

Laws shield surviving family members from abusive debt collection

Many Ohio residents have estate plans in place that determine what will happen to their assets after their passing. However, some forget to consider what will happen to their debts. Although the Federal Trade Commission prohibits debt collectors from holding family members personally responsible for the debts of deceased family members, some still try. This can become harassment, and abusive debt collection can be reported.

Federal laws also protect family members who live in the house of a homeowner who dies. As long as the mortgage payments are made, the bank will not foreclose. The same goes for automobiles on which the payments are kept up to date, although the laws are slightly different. Credit card debt can be complicated -- if the card belonged solely to the deceased, the debt should be handled by the estate. However, if a spouse or another person was a co-signer on a joint account, he or she may be responsible for the credit card debt.

A debt collector may not call about a time-barred debt

Some Ohio consumers who are facing difficult times may have to face those never-ending calls from collectors. The federal Fair Debt Collection Practices Act defines a debt collector as an entity who collects debts on behalf of others. This excludes the original creditor that extended the credit. Debt collectors not only collect unpaid debts for others, but they sometimes buy old outstanding debts, and any amounts of money collected will be for their own profit.

The Federal Trade Commission says it is important for any consumer to know their rights when they receive calls from debt collectors. There is a statute of limitations for debts, and once the debt is older than that, it is classified as time-barred. Debt collectors may not attempt to collect those debts. However, the applicable laws are complicated as they differ from state to state and under certain circumstances a debt can become active again.

Small business bankruptcy must be carefully navigated

Small business owners who are experiencing financial problems may benefit from learning about the available remedies. The federal Bankruptcy Code protects individuals and businesses in Ohio and other states. However, filing for bankruptcy is a complicated process and must be carefully navigated. Things to gather before consulting with a lawyer about a business bankruptcy include an up-to-date set of company books and accurate financial records.

It is also suggested that creditors who are informed of ongoing financial problems may be more inclined to work with the business owner during a difficult time. Any list of creditors must be complete because those debts left off the list will not be discharged in bankruptcy. It is also important to refrain from transferring any assets into the names of family or friends in an attempt to hide them from the bankruptcy court.

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