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Cincinnati Bankruptcy Law Blog

Debt collector charged after demanding payment on discharged debt

There are strict laws in Ohio and other states that govern actions taken by creditors to collect unpaid debts. Every debt collector must comply with the regulations of the law. One of them prohibits attempts to collect debts that bankruptcy proceedings have discharged. Last month, a consumer in another state filed a lawsuit alleging a debt collector had done just that.

Court documents indicate the plaintiff's debts owed to several creditors were discharged in personal bankruptcy proceedings in Aug. 2013. When debts are discharged, no further debt collection action may follow through in relation to the debts listed in the discharge. The complaint states that the defendant -- a debt collection agency -- initiated further action by sending letters of demand. The plaintiff claims to have received these letters -- addressed to her residential address -- from Oct. 16, 2015 through May 5, 2016.

When is best to file for bankruptcy to prevent foreclosure?

When Ohio consumers experience financial difficulties, they will likely explore their options to find remedies. While a bankruptcy filing may prevent foreclosure, a homeowner may be unsure of precisely when would be the most appropriate time to file. Should they file for bankruptcy in advance when they realize foreclosure is imminent, or should they wait until they receive advice that foreclosure actions have started?

Some are under the impression that a legal requirement under the Bankruptcy Code is to wait until a home is in foreclosure before filing, but that is a misconception. It is possible to reach agreements with creditors -- even the mortgage holder deserves consideration, and once compromises are reached, the ability to settle remaining debts can be considered. Negotiations may include the elimination of accrued interest and outstanding penalties, and this may influence the consumer's decision to file for bankruptcy.

Filing for bankruptcy might follow psychological phenomenon

Credit card debt that rolls over from month to month accumulates rapidly. Filing for bankruptcy might eventually be the only way to get back on track. Ohio consumers may be interested in the findings of an economist at a university in another state. He found that credit card companies use psychology to get people to pay the minimum amounts.

Researchers also estimate that between 9 and 20 percent of U.S. credit card holders choose to pay the minimum amount due rather than the full outstanding amount -- even if they could afford to pay the higher amount. The economist reckons the manner in which the credit card companies print their statements with the minimum required payment prominently placed is a psychological phenomenon that is called anchoring. This is a method of putting information that could influence a consumer's decision in a position that will anchor his or her focus.

Personal debt problems are not necessarily tied to the economy

It has been eight years since the economy started to show signs of recovery after the financial crash. In recent months, financial analysts and media pundits have spoken of the rise in the stock market as a sign is increased financial security. The inflation rate has remained low at roughly 2 percent, according to USA Today. As the economy continues to recover, analysts say that more Americans are seeing a rise in income. But, even with the low inflation rate and rising incomes, many consumers continue to struggle to make ends meet in the real world.

It is important to note that in a good economy, as well as in rocky times, individuals can face a variety of circumstances that make it difficult to manage debt. Many honest, hard-working people can face debt problems. Overall economic indicators may suggest that the economy is good. But that does not necessarily mean that the national statistics are felt in neighborhoods throughout the Cincinnati area.

Explore the basics of bankruptcy before filing

Unanticipated events such as the loss of a job or a medical emergency have caused financial difficulties for many Ohio consumers. When debt problems become overwhelming, researching possible remedies may be the first step to take. One of the options that usually provides a fresh start is bankruptcy, and learning about the different filing alternatives can help in deciding the most appropriate course of action. 

Chapter 7 -- also called liquidation bankruptcy -- is typically the option suitable for individuals who are simply unable to repay their debts. A court-appointed trustee will supervise the sale of assets through a liquidation sale to raise money to pay creditors. However, each state has a list of exemptions to ensure that the liquidation excludes some necessities. Credit card and medical debts along with other unsecured debts may be discharged through the bankruptcy proceedings, relieving the consumer from the responsibility to pay those financial obligations. However, bankruptcy will not eliminate certain debts such as child support, most taxes and more.

Business debt lead to sports distributor's Chapter 11 filing

A sporting goods distributor that has several stores in Ohio -- some in Cincinnati -- has announced its recent filing for Chapter 11 bankruptcy. It announced that liquidation sales would immediately commence at all 68 its stores nationwide. This came after the company was unable to reach agreements related to business debt in out-of-court negotiations.

According to a spokesperson for MC Sports, it suffered similar hardships to those reported by others in the same industry, namely increased competition from the e-commerce industry, direct sales and more. The company is moving its focus away from only sports apparel, footwear and other sports gear. Fewer, larger stores will include outdoor sports categories such as fishing, hunting and more.

Understanding bankruptcy and your credit score

Many individuals and married couples in Ohio carry significant balances on their credit cards. Often, consumers try to manage overwhelming medical bills, credit card payments and other forms unsecured debts by making the minimum monthly payments. If you can keep up with these payments without falling further in debt, all may be well.

However, when minimum payments can no longer be serviced, there may be a strong temptation to tap into home equity or retirement accounts to get back on track. There are many reasons consumers continue to struggle with unmanageable debt. One common reason is the fear that seeking debt-relief assistance may adversely impact credit scores.

Chapter 7 bankruptcy: Will you lose your car?

Unfortunately, anyone can experience financial difficulties. When an Ohio resident faces financial challenges that seem overwhelming, he or she might consider bankruptcy. However, if that person needs a car to earn a living, there may be a fear of losing it in bankruptcy. While Chapter 7 bankruptcy liquidates most assets, there are steps that a consumer can take to maintain ownership of a car.

The options will depend on whether the filer still owes money on the vehicle. The state has a vehicle exemption amount, and if a paid-off car's value is below that amount, the bankruptcy court may allow the consumer to keep the vehicle. However, if the value exceeds the exemption amount, the court may order the surrender of the car. If there is an outstanding balance of the car loan, the owner's choices are to continue payments or to give it back to the loan provider and have no further liability.

Business debt: The duties of a Chapter 11 bankruptcy trustee

When small business owners in Ohio go through difficult times, they may be looking at options to relieve the pressure and get back on track. Business debt can be overwhelming, and the appropriate step might be to seek professional advice. A Chapter 11 bankruptcy filing may be a suitable solution, and the business may be saved under the supervision of a court-appointed trustee.

The U.S. Trustee's duties include the review of the requests for relief and tailoring the relief according to the circumstances. The requests may include professional services, emergency financing and payments to individual suppliers. The trustee must also establish committees to represent creditor groups such as unsecured creditors, equity security holders or bondholders and more. He or she will then organize and oversee the seven to 15 committee members -- typically accountants and attorneys representing creditors.

Bankruptcy or credit card debt forgiveness: What's better?

Ohio consumers with overwhelming credit card debt may have questions about the Credit Card Debt Forgiveness Act, particularly if they are unsure whether it will be a suitable remedy for their circumstances. Pursuing this as a debt relief option may be best for consumers who have debts outstanding on multiple credit cards, and want to get reduced monthly payments. It is also a method of avoiding bankruptcy but comes with adverse consequences.

Typically, the only time a credit card company will consider forgiving a portion of a cardholder's debt is when it suspects the client may file for bankruptcy if some of the debt is not forgiven. By forgiving a portion, the lender may get some of the money owed, while bankruptcy will usually discharge the entire amount, leaving the credit card company with nothing.  However, any forgiven debt over $600 will be taxable because the IRS will treat it as income.

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