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

Millennials are buried in credit card debt

Young people in Tennessee need to be careful with credit cards. When they take on credit card debt, it can be difficult for them to get out of debt because of the high rates of interest that card issuers charge.

According to a report by CNBC, millennials have long been known for being averse to taking on debt. That reportedly is changing as an increasing number of people ages 18 to 29 are taking on credit card debt. Data from the New York Federal Reserve shows that people in that age group had credit card delinquencies of 90 or more days that exceeded 8% of the balances, which was the highest level in eight years.

Bankruptcy collections

When people living in Tennessee file for bankruptcy, they typically do so with the understanding that the automatic stay of bankruptcy, and eventual discharge of debts, will stop creditor harassment. Unfortunately, there have been cases in which a creditor has decided to pursue a debt after a bankruptcy discharge.

Individuals who have filed bankruptcy do have options in such situations, however. These include asking the court to intervene on their behalf. In a recent case, creditors sought to pursue a judgment for legal fees against an Oregon man after his bankruptcy discharge. When the case went back to bankruptcy court, the creditor was found in contempt for attempting to collect a debt that was discharged in bankruptcy.

Cancer patients may look to bankruptcy for relief

When a Tennessee resident is diagnosed with cancer, it's important to concentrate on overcoming the disease. However, a patient may also find that financial worries continue to haunt them throughout the treatment process. Indeed, there are good reasons for these concerns; even people with health insurance often struggle to pay their medical bills during cancer treatment. Prescription drugs can cost in the thousands of dollars and treatment can amount to $150,000 or more.

According to one 2013 study, cancer patients are over 2.5 times more likely to declare personal bankruptcy. While a number of factors can contribute to this decision, including forced time away from work and job loss due to illness, medical debt is one major issue for those who have gone through cancer treatment. Bankruptcy can provide a road to a new financial future because creditors cannot continue to collect debts once the process begins. Collection calls can add additional stress to an already tense and fragile medical situation. For people struggling with medical bills and credit card debt, bankruptcy can offer significant relief.

Bankruptcy could discharge debts from lawsuit judgments

Some bankruptcy cases in Tennessee involve court-issued judgments that obligate defendants to pay debts resulting from lawsuits. Because federal law governs bankruptcy, the judgments issued by state courts will not automatically avoid discharge within a bankruptcy. A creditor expecting to collect on a judgment, however, might petition the bankruptcy court to deem the applicable debts nondischargeable if the judgment resulted from intentional conduct or fraud.

A creditor striving to defend a judgment debt from discharge in bankruptcy must produce adequate proof that the debtor acted intentionally or actually committed fraud. A bankruptcy court could look closely at the documentation for the original court case that produced the judgment. A bankruptcy court might block a judgment discharge if the debtor's original actions satisfy four necessary elements. These are fraudulent misrepresentation, interference with the actions of another party, inflicting harm on the plaintiff and the plaintiff relied on the defendant's misrepresentation.

Bill introduced dealing with student debt and bankruptcy

Some people in Tennessee who are struggling with student loan debt may find it easier to discharge those debts in bankruptcy if a federal bill that has been introduced is successful. Discharging student loans has gradually become more difficult since the 1970s, and currently, in order to be eligible for discharge, student loan payments have to be causing "undue hardship".

The problem with the undue hardship standard was that it was never defined and was subject to very different interpretations across jurisdictions and even individual judges. Attorneys struggled to advise their clients regarding student loan debt since it was so difficult to predict how it would be regarded as part of a bankruptcy filing.

Credit card companies see potential red flags

If a Tennessee resident fails to pay a credit card balance, the card issuer may write it off. According to a representative from Capital One, a degradation in customer credit quality has led to an increasing number of charge-offs. It has also lead to an increasing number of credit accounts becoming 30 days past due. The charge-off rate in the United States was 3.82% for the first quarter of 2019. However, the charge-off rate at Capital One was 5.04%.

In some cases, a lack of information about a customer was to blame for accounts being given to riskier borrowers. Those potentially impacted by the financial crisis may have had notes on their credit report come off in recent years. At Discover, they are trying to protect themselves by closing dormant accounts and limiting access to credit limit increases.

Why Tennessee seniors shouldn't use 401(k) funds to pay off debts

The number of older Americans filing for bankruptcy today is three times what it was in 1991. A combination of factors has contributed to the increase, including rising health care costs and a decline in pension benefits. Generally speaking, older Americans have fewer retirement funds today than in the past. This puts them at a greater risk for bankruptcy. In many cases, a 401(k) savings plan is the only cushion they have to fall back on.

Because older Americans want to honor their obligations, many are reluctant to file for bankruptcy. To avoid filing, some draw down all or a significant portion of their 401(k) savings and use it to pay off debts. What often happens, though, is that they incur subsequent debt due to matters such as health emergencies and are left with no way to pay it off.

A break could be coming for student loan borrowers

Student loan debt is a major financial burden for many graduates throughout Tennessee and the rest of the country. This debt often prevents individuals and families from buying cars and even taking out loans for homes. In order to make things easier for borrowers, many advocates are proposing drastic changes to bankruptcy laws. Currently, discharging bankruptcy debt is a difficult process that involves specific proof of hardship.

The American Bankruptcy Institute's Commission on Consumer Bankruptcy is one of the leading forces behind proposed changes to bankruptcy law. They released a 274-page report that detailed a variety of problems with current standards, including attorney costs and the disproportionate number of African-American consumers affected by debt. Bankruptcy filings reached a record low in 2018 partly due to lack of access and strict eligibility standards for student loan debt.

The different types of bankruptcy explained

Some Tennessee residents may be able to file for bankruptcy to get a better handle on their finances. Both individuals and businesses can file for protection from creditors, and there are many different types of bankruptcy to choose from. Chapter 7 bankruptcy is known as a liquidation bankruptcy. It involves selling some or all of a debtor's nonexempt property in an effort to raise money to pay off creditors.

To qualify for a liquidation bankruptcy, an individual will need to pass a means test. A person who fails the means test may be required to file for Chapter 13 bankruptcy instead. A Chapter 13 case is known as a reorganization bankruptcy, and it can also be referred to as a wage earner's plan. Whereas a Chapter 7 case can be resolved within months, a Chapter 13 case can last for up to five years.

What to know about debt collection efforts

Debtors in Tennessee and throughout the country may be contacted by a debt collection agency. While there are many tactics that they can use to collect payment, there are also things they cannot do in an effort to obtain a debt. It is important for an individual to understand his or her rights under the Fair Debt Collection Practices Act, or FDCPA. It prohibits debt collectors from using abusive language or from contacting debtors at work.

Collectors are also prohibited from calling before 8 a.m. or after 9 p.m. without permission to do so. Debt collectors are also prohibited from contacting a debtor if they have been asked to do so in writing. The only exception is to acknowledge receipt of such a request or to inform a debtor about a lawsuit or other action. Furthermore, the FDCPA makes it illegal to contact a debtor's family members.

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Nashville Office
618 Church Street, Suite 410
Nashville, TN 37219

Phone: 615-686-2279
Fax: 615-255-4516
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Cookeville, TN 38501

Phone: 931-400-2218
Fax: 931-526-6244
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