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Cincinnati Bankruptcy Law Blog

Small business owner warns about merchant cash advances

Business owners in Ohio may encounter unanticipated financial problems if they start a venture without a sizeable nest egg. It is not uncommon for business owners who encounter financial difficulties to be unable to keep up with scheduled payments. This may cause severe cash flow problems. If a small business owner is unable to settle debts, he or she may fall into the trap of a merchant cash advance that can cripple the business in no time at all.

The owner of a small business in another state explained the adverse impact such an advance had on her roofing business. Out of desperation, she applied for a merchant cash advance of $95,000, and it was approved almost immediately. However, $35,000 was deducted from that amount for fees and interest -- at 41 percent -- and she received only $60,000. Repayment started immediately, and she had to pay approximately $560 per day. Needless to say, this only exacerbated her problems; before long she took another cash advance, bringing her business debt to $130,000.

Unanticipated expenses can lead to filing for bankruptcy

Overwhelming credit card debt is not limited to certain income groups. In fact, in Ohio, it is not uncommon for families with higher incomes to accumulate more debts. In many cases, consumers choose to file for bankruptcy to obtain a fresh financial start. A family in another state explained their struggle to overcome their debt load.

The wife has a job in the financial department of a corporation, and her husband is employed as an automotive painter. Along with about $25,000 in credit card debt, they have unpaid medical bills totaling more than $6,000. They say their debt was manageable until the wife needed surgery to her hand.

Bankruptcy likely a better option than $5,000 gizmo

Many consumers in Ohio and elsewhere struggle to avoid spending. Credit cards make it easy for people to spend too much, and before many know it, they are overwhelmed by debt. An international robotics company and a fashion designer recently introduced a gizmo that is intended to help people conquer impulsive buying. The self-locking purse comes with a $5,000 price tag, making bankruptcy a more realistic and satisfying option in most circumstances.

The designers of the bag determined that most consumers have certain times of the day and specific stores at which their resistance is at its lowest. The gadget -- called the iBag2 -- will be fitted with a microprocessor that will connect to a GPS. It will know whether the shopper is moving toward any of the pre-programmed danger zones; with a built-in timer, it will know when the consumer is vulnerable. These signs of potential spending sprees will cause the straps of the bag to vibrate, and amber lights will start flashing.

Remedies are available to prevent foreclosure

Any homeowner in Ohio will do whatever is possible to maintain ownership of the property. Unfortunately, unforeseen circumstances sometimes jeopardize one's financial stability, and a threat of foreclosure may become a reality. Certain steps can be taken in an effort to prevent foreclosure.

If a homeowner is temporarily unable to make any mortgage payments, the lender may allow a forbearance agreement. This is an agreement by which the lender agrees to suspend any payment obligations for a specified period during which foreclosure will not be pursued. Certain negotiated conditions will go with such an agreement that will likely include foreclosure upon default.

Credit card debt -- a necessary evil that can lead to bankruptcy

Apparently, many millennials in Ohio and elsewhere are shying away from the use of credit cards. Mountains of student loan debt may be one reason. It also may be a response to the fact that many consumers sought bankruptcy protection during the recent recession because of overwhelming credit card debt.

Millenials seem to prefer debit cards and cash rather than credit cards. While some regard credit cards as the root of most financial problems, it is also seen as a necessary evil with unique features not shared by other payment methods. Some of the advantages of credit cards include extended warranty protections at no extra cost for products paid by credit card. Many cards offer travel insurance, cash back deals, reward points and more.

Medical debts can be discharged in personal bankruptcy

Unpaid debts can have a detrimental impact on the future financial stability of consumers in Ohio. A scarred credit score can jeopardize a person's ability to obtain a mortgage, get financing for a car or rent accommodation. In many cases, the source of the debt is unanticipated medical debts, and, fortunately, there are manners in which the debt can be reduced, or it may even be possible to get it discharged in personal bankruptcy.

It is not uncommon for medical bills to have errors that can be substantial. Some mistakes are easy to spot, such as duplicate charges, but others may need the eye of a professional to audit complicated medical bills. Once errors are identified, a call to the facility's accounts office may result in a significant drop in the owed amount.

Many bankruptcy filings follow minimum payments on credit cards

Credit cards are often the cause of consumers having to face mountains of debt with not enough funds to settle the bills. In fact, credit card debt has led to many bankruptcy filings in Ohio. One of the causes for spiraling credit card debt may be the fact that some consumers are unaware that making the minimum required payment every month is a dangerous practice.

If that is so, then why would credit card providers be happy with consumers paying the minimum payments? The truth is that those who pay their full credit card accounts every month cost the bank a load of interest that they would otherwise earn from those who simply pay the minimum amounts. Furthermore, by encouraging smaller payments, the bank will hold consumers in debt for many years.

Proposed new rules may stop abuse by debt collection agents

It is reported that approximately 70 million American consumers, including some in Ohio, have unpaid debts. Over 6,000 debt collection agencies nationwide are tasked with collecting these past-due amounts, and many have made themselves guilty of harassment. It is not uncommon for debt collectors to be abusive, and a list of recently proposed rules may protect consumers about some of their aggressive tactics.

The new rules that were proposed by the Consumer Financial Protection Bureau include some that may prevent agencies contacting people without verifying the details from the lender. Before a call is made, the collector will have to check the consumer's full name and also substantiate the debt. It is also proposed that the number of calls made to a borrower is limited to six calls per week and that the consumer may put a limit on calls during working hours.

Ownership of a house is not necessarily lost in bankruptcy

Ohio residents who are experiencing financial hardships and fear losing their homes may be considering their options. One of those is filing for bankruptcy, and the intention of the federal Bankruptcy Code is to help people to rebuild their lives. But will that save their homes? The answer depends on several aspects related to the unique circumstances of the individual and also the laws of the state.

If a Chapter 7 bankruptcy is filed, a person's home may be safe if the equity in the property is lower than the state government's exemption amount for houses. However, if the equity exceeds the exemption amount, the home may be sold at auction to cover some of the unpaid debts. Ownership of cars may be saved by signing an agreement reaffirming the debt after bankruptcy. If this is not done, the car may be sold with the proceeds applied to existing debt.

How does a means test affect a bankruptcy filing?

Ohio consumers who are considering their options for eliminating overwhelming debt may be confused with the qualification requirements for each option. These requirements are unavoidable if they choose to file for bankruptcy and the protection it offers. While most people know that consumer debts, such as credit card and medical debt, can be discharged almost immediately through Chapter 7 bankruptcy, they may not be aware that a means test must be completed to determine eligibility for Chapter 7.

The object of the test is to determine whether the consumer earns below the state's median income, or whether he or she has any disposable income after all expenses are paid to pay off existing debts. Those with a below-average income may qualify for Chapter 7 immediately, and although some assets may be liquidated to pay creditors, necessities are mostly exempt. Once a means test qualifies a consumer, a Chapter 7 bankruptcy filing will put an immediate stop to all debt collection actions by creditors.

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