Lefkovitz & Lefkovitz
Nashville Office 615-686-2279 Cookeville Office 931-400-2218
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Nashville Bankruptcy Law Blog

Reasons to consider bankruptcy as opposed to foreclosure

If a Tennessee resident is struggling to keep up with a mortgage payment, it may be possible to ask for a loan modification. However, there is no guarantee that a lender will allow this to happen. If a lender does not want to modify the terms of a home loan, a homeowner could choose to file for bankruptcy. This may postpone the foreclosure process, which generally begins two or three months after a missed mortgage payment.

Foreclosure can be delayed in a bankruptcy case because the judge will typically order a stay of creditor collection activities. This is generally true whether a person files for Chapter 7 or Chapter 13 bankruptcy. It is possible for a lender to ask that the stay be lifted. If this happens, a foreclosure could proceed even while a bankruptcy case is still ongoing.

Discharging student loans in a bankruptcy

With student loan debt increasing throughout the U.S., many college graduates in Tennessee may be tempted to turn to bankruptcy. While students loans were dischargeable in bankruptcy prior to 1976, Congress has amended bankruptcy laws several times. Since 1998, public student loans have not been allowed to be discharged in bankruptcy absent a showing of undue hardship. In 2005, Congress made the same provisions with respect to private student loans.

In changing the bankruptcy laws, Congress did not define the term "undue hardship." However, some federal courts have determined that a borrower must show that extenuating circumstances make it impossible to maintain a minimum standard of living. In addition, it should be clear that those circumstances will continue over the entire term of the loan. Furthermore, the borrower must have attempted to repay the loan in good faith. Courts may also consider the age, income and health of the borrower.

Getting out from under credit card debt in 2019

Every year, many Tennessee residents find themselves trapped in a financial hole with a load of debt. To make matters worse, this debt keeps accumulating interest every day, meaning that the hole only gets deeper with each passing month. These debtors stand to gain from learning a few tips and tricks that might help them find financial recovery.

First of all, before tackling the problem, a debtor needs to know just how bad matters really are. They should compile a list of all their credit card debt along with the interest on each card. They should prioritize the cards with the highest interest while making sure that the minimum payments for all the other cards are satisfied.

6th Circuit rules that FDCPA prohibits third-party collections

Once a consumer disputes a debt according to the requirements of the Fair Debt Collection Practices Act, debt collectors and third-parties must cease collection activities. The Court of Appeals for the 6th Circuit, of which Tennessee is a part, ruled that third-party collections that were set in motion by the debt collector must cease when the consumer disputes the debt. The case involved pre-foreclosure activities by third parties, but it is likely that lawyers for debtors will argue it applies to all third-party collections activities.

The district court had granted summary judgment favoring the debt collector in the case, a law firm, because it had ceased its owned collections actions once the dispute was received. The 6th Circuit reversed the lower court's decision, however, saying that the FDCPA required that the law firm intervene in the actions of third parties it had engaged to help pursue the debt. Specifically, the law firm had contacted a newspaper to post a foreclosure notice and arranged for a sheriff's sale of a property held by the debtor.

Wage garnishment and bankruptcy: Fixing a crisis situation

Most of us hate the feeling of not being able to repay a debt. If you're struggling to make payments and collection agents are harassing you, threatening to take your assets or bothering your friends, family members or neighbors, it's easy to become depressed and/or anxious. 

The reality of wage garnishment can be a nightmare. By getting a legal judgment against you, a creditor can go into your paycheck and take money you need for critical expenses like food and housing. That can be very bad news.

Fewer people are filing for bankruptcy compared to a decade ago

In September 2018, there were more than 770,000 bankruptcy filings in the United States. Of those cases filed in Tennessee and elsewhere, 97 percent were consumer bankruptcy filings. The number of cases filed was down from the roughly 1.6 million filed in September 2010. However, the downtrend in bankruptcy filings may be related to the cost of filing. It may also be related to the fact that many people don't have assets to protect.

Legal fees for a Chapter 7 case average about $1,200, and that number jumps to $3,200 for Chapter 13 cases. However, those who file for Chapter 13 bankruptcy may be allowed to pay legal fees in installments. Older Americans tend to be more likely to file for bankruptcy because of limited financial resources. Professionals who follow the issue of bankruptcy do cite other more mundane reasons why bankruptcy filings have dropped in the past decade.

How to tell if credit card balances are excessive

There are many signs that a Tennessee resident may have too much credit card debt. For instance, if they are using credit cards to pay off other credit cards, that is likely a problem. Other signs include if card balances are maxed out or if payments are higher than the debtor's other bills. Those who have a high debt-to-income ratio should also check to see if their credit card debt is causing the problem.

Ideally, an individual will aim to use no more than 30 percent of their available credit limit. Anything higher than this could indicate to lenders that the cardholder is not responsible with their debt. An exception can be made for those who use more than 30 percent of a balance in a given month but pay it off before the due date.

Bankruptcies more prevalent among older Americans

In 2017, there were 789,000 bankruptcy filings, which were the second-lowest since 1990. That compares to the 1.6 million filings in 2010 in the aftermath of the Great Recession. However, the decline in bankruptcy filings hasn't been uniform for all age groups. Older Americans in Tennessee and throughout the country are filing for bankruptcy at a higher rate than in previous years. There are several reasons as to why this may be the case.

First, people in this age group are contending with higher out-of-pocket health care costs as well as fewer pension benefits. Furthermore, their Social Security benefits aren't necessarily as good as other generations received. A researcher from Boston College found that these payments only replace 38 percent of a person's income as of 2010. In 1980, the payments replaced 48 percent of an individual's income after retirement. Workers who have pensions are unlikely to have defined benefits.

Is bankruptcy a recession-proof solution to problem debt?

Yes, it is. If you qualify for it. Now that we have an answer, let's talk about the relationship between recessions and bankruptcies.

Recessions, which Oxford Dictionaries defines as times of economic decline lasting two quarters or more, have long been part of bigger economic cycles in our country. During the "Great Recession" a decade ago, millions of Americans lost their jobs and/or homes, and many of those people used bankruptcy filings to alleviate their burdens.

Medical bill and bankruptcy

Many people in Tennessee find themselves overwhelmed by debt suddenly after emergency medical care without health insurance. One woman in California drove herself to the emergency room after a car accident to avoid the costs of an ambulance ride but still was billed $20,000 for her trip to the ER. Now she must choose between paying the debt and getting care for her sprained shoulder.

Among different age groups, the amount of unpaid medial bills is highest for adults in their 20s despite the fact that overall the cost of medical care for this age group is low. The median amount of medical debt in collections among different ages peaks at age 27 with 11.6 percent of medical debt in collections and a median amount owed of $684.

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Nashville Office
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Nashville, TN 37219

Phone: 615-686-2279
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Cookeville, TN 38501

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