Nashville Bankruptcy Law Blog

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.

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.

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.

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.