Lefkovitz & Lefkovitz
Nashville Office
Cookeville Office
Serving all of Middle Tennessee's Bankruptcy Needs
We help individuals and businesses find the right solution to their money problems.

Nashville Bankruptcy Law Blog

Is debt consolidation a good idea?

Tennessee residents who struggle to pay off their financial obligations often consider seeking relief through certain debt management programs as an alternative to bankruptcy. One option is that of debt consolidation, in which the debtor either obtains a low-interest loan to pay off all debt at once, or transfers balances to a zero percent interest credit card.

There are two primary reasons for consolidation. The first is that a consumer seeks to lower the cost of the debt by lowering the amount of interest he or she is paying. The second reason to consolidate is the convenience of making only one payment per month.

Five bankruptcy lies that you shouldn’t believe

Bankruptcy is a loaded topic. Many people have strong opinions about what it is and whether it’s even ethical. But since they may be missing important information about bankruptcy, lots of struggling consumers believe lies that keep them from enjoying the incredible benefits – we can call it financial magic – that a Chapter 7 or Chapter 13 filing can unlock.

Being in debt feels horrible, especially when the debt comes from something beyond your control, like an income loss, an illness or a divorce. Are you letting any of these lies hold you back from getting the debt relief you want?

Helping Tennessee residents understand bankruptcy

An individual or business entity may opt to file for bankruptcy as a way to handle an issue related to debt or other financial difficulties. One of the most important things to know about bankruptcy is that there are different options available. For instance, individuals might benefit most from Chapter 7 or 13 bankruptcy while businesses generally opt for Chapter 11.

Chapter 7 is a liquidation bankruptcy -- if a business files for this type of protection, it will be shut down for good. Chapter 13 bankruptcy allows for debts to be reorganized and repaid over the course of three to five years. Those who are thinking about filing for bankruptcy should understand that there are fees associated with doing so. In addition to the financial cost of such a decision, an individual may see his or her credit score go down significantly after filing.

How putting off Chapter 7 could be costing you thousands

Unsecured debt can grow into a serious problem in a matter of months. Very often the triggering event is a job loss, a divorce, an illness or another very expensive problem that busts your budget and creates a financial crisis, seemingly overnight.

With their limited savings exhausted, many consumers turn to credit cards, loans and lines of credit to provide temporary help in paying the bills during that crisis, only to discover massive balances that they simply can't pay off. If you've exhausted your other options and you already know a Chapter 7 filing may well solve the problem, delaying bankruptcy is probably costing you a lot of money.

Equifax makes subtle change to reporting policy

Typically, Tennessee residents would need to contend with a Chapter 13 bankruptcy on their credit report for seven years. However, in the past, those who had an Equifax credit report may have had to deal with that bankruptcy for 10 years. This may have been true for those who failed to complete their Chapter 13 plan, which isn't an uncommon occurrence.

Overall, about half of Chapter 13 cases are dismissed for various reasons including not being able to keep up with plan payments. Between 2008 and 2010, 574,000 Chapter 13 cases were filed and dismissed. Those who had a bankruptcy on their Equifax credit reports may have had a harder time getting a job, getting an apartment or getting the best rates on loans or insurance products. It is believed that such a policy had a larger impact on African-Americans as they are more likely to file for Chapter 13 bankruptcy.

Credit card debt, quicksand and escaping through Chapter 7

Credit card debt can feel a lot like quicksand, a volatile blend of sand and water that exists in real life, not just in old TV shows and movies. Quicksand looks harmless on the surface, but once you've fallen in, it can be very difficult to get out; asphyxiation, thrombosis, fatigue, heat and dehydration end up killing many victims. As watchers of 1970s television can attest, the panicked struggle to escape makes you sink deeper.

For many consumers with big credit card balances, Chapter 7 bankruptcy provides an excellent escape. If you're in debt because of a job loss, a divorce, an illness or another serious problem, exploring the benefits of Chapter 7 may be a life-saving move, financially and emotionally.

Curing your credit card disease: Bankruptcy vs. debt management

In many ways, consumer credit card debt is like a disease, a crippling ailment that afflicts people of all ages, backgrounds and income levels. But often a credit card problem is just a symptom of a more significant issue like a divorce, a job loss or business failure, or a costly medical episode. When left unchecked, the debt can cause high levels of stress, which in turn can strain relationships, create or exacerbate anxiety and depression, and affect the consumer's physical health.

If diagnosed correctly, credit card debt can be treated in a variety of ways. The best course of treatment will depend on other aspects of the patient's financial state. Two popular treatment methods are bankruptcy, which can wipe out or restructure payments over time, and consumer debt management programs, which require the debtor to commit to a payment schedule for a period of time, at a lower, negotiated interest rate.

Buying or renting a home after Chapter 13

Tennessee residents who file for Chapter 13 bankruptcy may know that doing so will impact their credit for a significant period of time. This type of protection from creditors is available to anyone with unsecured debts of $394,725 and secured debts of less than $1,184,200. While it may be more difficult to rent or buy a home after a bankruptcy, it is still possible to do so.

Those who are looking to rent an apartment may want to put their bankruptcy in context for prospective landlords. This may make the landlord feel better about approving a rental application, and renters may ask current landlords or others to write letters of recommendation on their behalf. Debtors who have filed for Chapter 13 bankruptcy may be able to purchase a home 12 months after filing if they use an FHA loan.

Bankruptcy isn't shutting down Toys 'R' Us

Toys 'R' Us stores in Tennessee and across the country will remain open even though the company is filing for bankruptcy. The struggling company has filed under Chapter 11, a type of bankruptcy designed to help a business handle and improve its financial situation without liquidating assets or shutting down.

The company has had financial difficulties since a leveraged buyout in 2005. A leveraged buyout combines debt and equity with the intention of using operating revenue to pay off the debt. For Toys 'R' Us that debt was $5.3 million. Since then, the company has not generated enough operating revenue to handle the debt effectively. Stiff competition in toy sales has come from online retailers like Amazon and big box stores like Walmart and Target.

Limited relief coming to people with medical debts

Reforms to credit reporting methods might help some consumers in Tennessee. Their medical debts that went to collections when insurance companies took too long to pay could be removed. As part of a settlement with state attorneys general, three major credit bureaus agreed to wipe clear medical debt collections that insurers eventually paid. The settlement also establishes that credit bureaus will wait 180 days before placing unpaid medical bills on people's credit reports.

Data from the Consumer Financial Protection Bureau indicate that the credit reports of 43 million people include collections for medical bills. The credit reporting reforms, however, will not help many of those people. Less than 8 percent of credit records with medical bills show them as paid. An unknown portion of this small percentage might be eligible for removal because of belated insurance payments.

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618 Church Street, Suite 410
Nashville, TN 37219

Phone: 931-400-2218
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312 East Broad Street, Suite A
Cookeville, TN 38501

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