Consumer Bankruptcy

Consumer Bankruptcy, Debt Collection

Should I Hire a Debt Relief Agency to Avoid Bankruptcy?

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Consumers often resort to seeking the assistance of a debt relief company in an effort to avoid filing bankruptcy. However, hiring a third-party debt relief company is not always a wise decision for the consumer if bankruptcy is inevitable.

Some consumers decide to retain the services of a debt settlement company to negotiate payments on their outstanding debts. However, often the better option ends up being either having the consumer directly settle his or her debts without hiring another company or having the consumer move forward with filing for bankruptcy.

Debt settlement companies say they can work directly with the consumer’s creditors to settle their outstanding unsecured debts. In order to accomplish this, most debt settlement companies tell their clients to stop making payments on their debts, thereby pushing the debts into collections. The debt settlement company will then tell the consumer to pay them a monthly fee, which will be set aside into a savings account for future settlement of the person’s debts.

Unfortunately, there are many things a debt settlement company fails to tell the consumer when they are hired to negotiate the consumer’s debts. Ultimately, debt settlement is a business, and the company is looking out for their bottom line, not the consumer’s best interest, which is why so many debt relief scams exist.

First, while the debt settlement company is working on the consumer’s behalf, the total amount of debt will continue to grow thanks to interest accruing and fees being assessed when the consumer stops making payments. The consumer will also find his or her credit score taking a significant hit during this time since defaulting on a financial obligation is reflected poorly on someone’s credit report. Additionally, the creditor is under no obligation to work with the debt settlement company. They may be successful in settling a debt, the creditor is not obligated to take a settlement offer just because one is made. The creditor is always within their rights to pursue the full amount owed.

The consumer’s credit score will definitely be impacted by debt settlement. Essentially, entering debt settlement is an admission of the consumer not paying his or her debts as originally agreed. Additionally, the debt settlement will stay on the consumer’s credit report for seven years.

Ironically, debt settlement can also leave the consumer in an even worse situation than when he or she started, especially if the efforts to negotiate the debts are unsuccessful. For many consumers, going through debt settlement is essentially delaying the inevitable filing for bankruptcy. It is usually best for the consumer to first sit down with a bankruptcy attorney and analyze his or her situation to see which route is the best one to take.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Bankruptcy Law, Consumer Bankruptcy

When Should I File Bankruptcy?

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Chapter 7 bankruptcy is a powerful legal tool that allows those in financial crisis to cancel debts such as medical debt, credit card debt, and unsecured personal loans.

As soon as a Chapter 7 bankruptcy case is filed, the consumer receives immediate protection from his or her creditors. This protection comes from the automatic stay that is issued by the court upon filing. The automatic stay puts a pause on all collection actions, including collection phone calls, legal proceedings to collect on a debt, wage garnishments, evictions, and foreclosures. The automatic stay also gives consumers a chance to breathe and work with the court and bankruptcy trustee.  

Bankruptcy Law, Consumer Bankruptcy

Will a Bankruptcy Filing Remove a Vehicle Repossession?

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A bankruptcy discharge will relieve the filer of his or her debts, which means that the person can walk away with a clean financial slate.  However, a bankruptcy case does not remove all debts from the consumer’s credit report. In fact, certain debts and the legal proceedings associated with them can be difficult to remove, including vehicle repossession.

A consumer bankruptcy case, including Chapters 7 and 13, should remove negative marks on the consumer’s credit report. In a Chapter 7 bankruptcy case this is accomplished by liquidating the consumer’s assets that are not otherwise protected under a bankruptcy exemption and using those funds to pay off the consumer’s debts. Those not paid are then discharged at the end of the bankruptcy. Under a Chapter 13 bankruptcy case, the consumer works with the bankruptcy trustee on a repayment plan that lasts between three to five years. At the end of that time, the remaining debts are discharged from the consumer’s record.

Bankruptcy Law, Consumer Bankruptcy

Is It Possible to Refinance a Mortgage after Bankruptcy?

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One of the biggest fears expressed by bankruptcy filers is how a bankruptcy case will affect their ability to receive financing in the future.  While having a bankruptcy on a person’s credit report can make it more difficult to qualify for a mortgage, it is possible for someone who has completed bankruptcy to refinance his or her mortgage after the case is successfully closed.

A number of factors can influence how easy it is to refinance after bankruptcy, including the type of bankruptcy, whether it be a Chapter 7 or Chapter 13 bankruptcy. The type of mortgage loan that the borrower is looking to refinance can also heavily influence this.

Bankruptcy Law, Consumer Bankruptcy

When Is Filing for Bankruptcy the Best Option?

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Making the decision to file for bankruptcy is never an easy one. Many individuals hold off on filing for fear of what it will do to their credit or worse, fear of the unknown. For many consumers, taking that first step and initiating a bankruptcy case can be the best option for them. The key is deciding when to take that step.

The longer a person stays in debt, struggling to pay bills, defaulting on liabililities, the worse the financial damage will be.  Not to mention the emotional toll it takes.  By not taking action, a person can risk being sued by thier creditors or having their wages garnished. Credit card companies, creditors and even the IRS can take legal action to garnish your wages to pay off outstanding debt.

Consumer Bankruptcy, COVID-19

Consumer Bankruptcy Filings Level Off in August 2021

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Bankruptcy filings leveled off last month, according to figures from technology company, Epiq. The company compiled filings through their AACER bankruptcy program which showed that in the month of August, 32,225 new bankruptcy cases were filed, including Chapter 7 and Chapter 13 consumer bankruptcy cases. This figure is down slightly from the 32,391 reported in July 2021.

Despite the fact that consumer bankruptcy filings have decreased, commercial bankruptcy filings have increased approximately one percent from July 2021 with 1,724 cases filed.

Consumer Bankruptcy

Bankruptcy Filings Fall to Levels Not Seen Since 1985

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Bankruptcy filings have fallen to levels not seen since the mid-1980’s. The low number of filings are credited to the government aid and stimulus checks issued since the COVID-19 pandemic.

According to statistics from the Administrative Office of the U.S. Courts, 462,309 individuals and companies filed for bankruptcy in the fiscal year ending June 30, 2021, which is a 32 percent decrease from the previous year. The office also noted that this figure was the lowest one reported for a 12-month period since 1985.

Personal bankruptcy filings decreased 33 percent to approximately 444,000 over the course of a year. Business filings similarly declined, although by a lower percentage. Business bankruptcy cases dropped by 17 percent to approximately 22,500 filings.

Bankruptcy Law, Consumer Bankruptcy

Understanding the Ins and Outs of Bankruptcy

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The thought of filing for bankruptcy can conjure up all kinds of emotions. For many, all they know of bankruptcy is what they have heard from others or seen on television advertisements. However, the following information can be helpful in terms of understanding the ins and outs of consumer bankruptcy.

Types of Consumer Bankruptcy.

If a consumer is considering filing for bankruptcy, he or she has two options available. These options are based on the specific chapters within the U.S. Bankruptcy Code. The first option is called Chapter 7 bankruptcy, often referred to as a liquidation bankruptcy. A Chapter 7 case tends to take only several months to complete and involve the filer working with the bankruptcy trustee to sell nonexempt assets and pay off qualifying debts. At the end of the case, the remaining consumer debts held by the filer are discharged. However, to qualify for filing for Chapter 7 bankruptcy, the filer needs to be below a certain income threshold per the bankruptcy court’s means test.

The other option is Chapter 13 bankruptcy, which takes three-to-five years to complete and involves the filer working with the bankruptcy trustee to complete a structured repayment plan on the consumer’s debts. Chapter 13 cases, since they take longer, do cost more in terms of legal fees.

Consumer Bankruptcy

Fear Holds Many People Back from Ever Filing Bankruptcy

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There are many people who can benefit from bankruptcy, but put off filing due to fear and the myths surrounding bankruptcy. Bankruptcy offers consumers a fresh financial start and relief from the burden of debt, but for many, it is the fear of the unknown that holds them back from ever taking the first step. Every year, only a small portion of consumers who could benefit from bankruptcy actually move forward with starting a case.

According to the Federal Reserve Bank of New York, approximately 14 percent (14%) of U.S. households or nearly 17 million consumers owe more than they own. While most of these individuals could benefit from bankruptcy, less than one percent (1%) of them file for bankruptcy annually. In 2020, there were only 752,160 personal bankruptcies filed. 

Consumer Bankruptcy

Post-COVID Debt Continues to Grow as Bankruptcy Filings Fall in 2021

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Financial analysts had predicted a bankruptcy surge following the COVID-19 pandemic. Courts were closed for the majority of 2020, but as they began to reopen, it was believed that a massive wave of bankruptcy filings would follow. Oddly enough, that surge never came, and the number of consumer bankruptcy filings continue to drop.

According to figures from the American Bankruptcy Institute (ABI), 181,000 bankruptcy cases were filed in the U.S. by May 2021, which is 29 percent lower than the number of cases filed by that time in 2020. As many people were forced out of jobs or laid off with businesses temporarily or even permanently closing, consumers are continuing to rely on credit cards to cover expenses.