Your Trusted Bankruptcy Attorneys in Franklin, TN
Are Creditors pushing you into bankruptcy?
The Federal Trade Commission (FTC) recently released a report providing a look into the debt-
buying industry. The report reveals that the rules and guidelines created to protect consumers
from debt collection abuses need to be revised. The FTC focused on what happens when debt
changes owners and found:
Debt buyers paid an average of 4 cents on the dollar for delinquent consumer accounts.
Prices fluctuate according to the age of the account.
Debts are sold in bundles. Some debt buyers hand-pick a certain type of debt from the
bundles they own to resell to other debt collectors who prefer that certain type of debt.
Debts are sold “as is” and the debt buyers are given a limited time in which to return the
debts that are uncollectable. Additionally, there is no guarantee that the documentation
supporting the debt is complete or accurate.
Under the sale terms, debt buyers face a limit on the number of additional supporting
documents they can request from a creditor per portfolio. Once they exceed that limit,
they have to pay fairly hefty fees, often between $5 and $10 per document.
What does this mean to you?
If you dispute the validity of your debt, the debt collectors have to spend more money to
investigate the validity of the debt. The most common reasons a consumer challenges a debt is
they either disagree with the amount of the debt or they believe the debt isn’t theirs. The Fair
Debt Collection Practices Act (FDCPA) requires a debt collector to investigate and verify the
validity of a debt if the consumer requests it. The study found that only half of debts consumers
disputed were verified!
What happens when I ask for the debt to be verified?
Because debt collectors often do not get key information from the original creditor, Section
809 of the FDCPA requires, among other things, that debt collectors notify the consumer of the
amount of the debt and the name of the creditor. They must also include in the notice a statement
that unless the consumer disputes the validity of the debt in writing within 30 days of the notice,
the debt will be assumed valid. If the consumer disputes the debt, the debt collector must obtain
verification from the original creditor and send the evidence supporting the debt to the consumer.
How can I use this to avoid bankruptcy?
If you are being overwhelmed by your consumer debt, you may be considering filing for
bankruptcy protection. While bankruptcy can provide you with a fresh financial start, you may
want to try negotiating with your debt collectors before you file. Many times debt collectors will
allow you to pay a small percentage of your debt owed in order to avoid having to take the time
and expense of verifying the debt. If they are aware that you are considering filing bankruptcy, it
can also motivate them to get something rather than nothing!
If you are fighting with debt collectors or considering filing for bankruptcy protection,
contact Lynda Jones for help!
New debt limits start on April 1
Can you have too much debt to file for bankruptcy? The short answer is yes! The debt limits for the filing of chapter 13 bankruptcy will go up again on April 1, 2013. Call your local bankruptcy lawyer for details.
The rich get richer and the poor get poorer
Sadly, the gap between the haves and the have nots grows wider each year. As the wealthiest individuals in society reap more profit, they consume the finite amount of money in the world. The result? The poor are left with a smaller slice of money upon which to live. And the poor are forced to slide into bankruptcy to deal with medical bills and defaulted loans. The hardworking middle class who attends college through student loans find themselves trapped in middle income unable to pay back hundreds of thousands of dollars in school debt. They have difficulty accumulating wealth in order to purchase a home. Generation x and y are delaying home purchases by living at home with aging parents. A side effect of this financial chain reaction is that as they graduate, they fail to stimulate the economy and jobs since they are unable to participate in the housing market.
Divorce is another factor contributing to the decline of our economy. One would think if 2 people need housing that home purchases would double. But divorce often reduces the living standard of both the woman and the man after divorce. Money is tight and mothers delay purchases for children. Survival becomes the norm and wealth accumulation is stunted.
Bankruptcy is not the cause of society’s problems. It is just a symptom. Explore the facts. Many business owners file bankruptcy to go on to bigger and better successes later in life.
Student loan or indentured servitude?
Student loans are a growing crisis in our country. Ten years ago I saw friends who had up to $80,000 in debt when they finished law school. Now the numbers are worse. I see clients weekly who start at $80,000 and go up to $200,000 in nondischargable student loan debt? How does this happen?
Should student loans be available to students who barely make it through each semester with poor grades? Should a student be required to take a full course load of at least 15 hours to be eligible for loans?
The solution is not going to be easy to craft. We want to encourage people to graduate from college with a usable degree. We want people to be educated and informed about the world around them. But what about the students who haven’t found themselves?
Student graduating with degrees in Tennessee can make anywhere from $25,000 to $60,000 a year at graduation. A $200,000 student loan can mean $1,000 to $1,400 a month in payments. There is not much left to live on after the loan is paid. Students will have to live with mom and dad in order to pay off the debt before going out on their own. Married students will not be able to support their families upon graduation.
Students will also take 10 to 20 years or more to pay off the debt. This delays their ability to purchase a home and contribute income to the economy while the loan is repaid.
Congress needs to take action regarding interest on these debts and consider limits on students who appear to be perpetually enrolled. The current debt forgiveness programs for teaching appear to work and other similar programs can be enacted to achieve similar results.
Modification or chapter 13?
If you are delinquent on your mortgage payments or facing foreclosure, it is likely you are considering modifying your mortgage loan or filing for bankruptcy. Each option has its pros and cons, so it depends on your individual circumstances in determining which is more beneficial to you. Below are a few general considerations:
Mortgage Loan Modification
In order to obtain a loan modification, you typically must be past due on your mortgage. Many individuals choose to withhold their mortgage payment in order to qualify for a modification. However, it can take months to find out if your modification is approved. If you have not set aside the payments you are missing and your modification is not successful, it may be impossible to recover.
Additionally, while the modified amount of your monthly payment may be lower, your payback term will be longer. This results in additional interest being paid over a longer term. You may also have to pay additional fees such as foreclosure costs, legal fees and late fees that increase the principal balance that you owe.
It is also important to consider the tax consequences of modifying your mortgage loan. If a lender forgives all or part of a loan balance totaling $600 or more, that “income” must be reported to the IRS. If you don’t qualify for exclusions, you could find yourself with a large tax bill.
The pros of a mortgage loan modification is that it may make mortgage payments affordable, it can save the home, and successful modification can actually aid in improving one’s credit report. If homeowners maintain timely payments, credit scores can increase.
If a foreclosure proceeding has been started against your home, a bankruptcy filing will immediately stop it. A Chapter 7 bankruptcy can halt a foreclosure, but only temporarily.
If you file a Chapter 13 case, you can submit a plan of repayment that provides for your monthly payment and cures any arrearages over a 3 to 5 year term. The plan will also allow you to discharge (eliminate) the majority of your unsecured debt (medical bills, credit card debt, etc).
Under a Chapter 13, you may also be able to “strip” a second mortgage on your home. Lien stripping occurs when the value of your home is insufficient to support the first mortgage loan, leaving the second loan as an unsecured debt. Thus, you could keep your home and pay significantly less.
Lastly, debts that are discharged in bankruptcy are not taxable. Thus, you know you can obtain the debt relief you need without worrying about getting hit with a large tax bill later!
Small business owners can get a handle on their debt and still operate the business
Are you a hair stylist, painter, florist, landscaper, or other small
business owner? Has the decline in the economy caused you or
somebody you know to be overwhelmed with debt? Did your business
fail and leave you with a mountain of bills? Filing a Chapter 13
bankruptcy may be the answer to your troubles! A Chapter 13 filing
can help you transition from struggling financially to obtaining a fresh
start and getting back on your feet.
Many small business owners haven’t legally incorporated their
business as a corporation, limited liability company, or limited
partnership, which means they are personally liable for the debt
incurred by the business. In fact, it is common for small business
owners to use their personal credit card to pay for business
expenses. Thus, if the business fails or struggles financially, the
owner’s personal finances suffer too. If you need a way to get back on
your feet, consider a Chapter 13 bankruptcy.
– The Chapter 13 process is a “reorganization” of the debtor’s finances,
including the debts of the business, or discharge (eliminate) debt from
a failed business venture. Over a period of 3 to 5 years, a Chapter 13
debtor can (among other things):
• Eliminate unsecured credit card debt
• Eliminate unsecured debt owed to vendors
• Get caught-up on past due taxes
• Get caught-up on past due mortgage payments
As with other bankruptcy filings, as soon as the Chapter 13 petition is
filed, the automatic stay is effective and all collection activity against
the debtor must cease. In other words, collection calls stop, lawsuits
come to a halt, and other legal actions by creditors immediately
cease. This allows the debtor to regroup and reorganize without the
constant harassment of creditors.
If you or somebody you know is having a hard time due to the failure of
a small business or simply struggling because of the slump in the
economy, a Chapter 13 filing may be the wisest way to transition to a
new start. Getting the burden of debt off your shoulders is a great way
The Human Condition
Lawyers often see people at the worst points in their lives. We see turmoil, stress, deflated hopes, crashed businesses, shattered dreams and pick the pieces up to help people reassemble their lives. Cancer , for example, can devastate family finances. Say what you will about the nation’s new healthcare law, it will help middle class families who need it most.
On the bright side, lawyers often help people build dreams. We help architect a new business plan, enable a clear financial path to plan for a stable retirement and more.
Call our firm for a consultation on your situation. As Mr. Rogers mother’ once said….”Look for the helpers”. We are here for you.
Congress has halted the dive off of the fiscal cliff ( What does that mean to you?)
The President reached an agreement with Congress and has passed a comprehensive act which does a number of things:
1. Restores the 39.6 percent rate for high-income households, as in the 1990s: The top rate would return to 39.6 percent for singles with incomes above $400,000 and married couples with incomes above $450,000.
2. Capital gains rates for high-income households return to Clinton-era levels: The capital gains rate would return to what it was under President Clinton, 20 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000.
3. Reduced tax benefits for households making over $250,000 (for singles) and $300,000 (for couples): The agreement reinstates the Clinton-era limits on high-income tax benefits, the phaseout of itemized deductions (“Pease”) and the Personal Exemption Phaseout (“PEP”), for couples with incomes over $300,000 and singles with incomes over $250,000. These two provisions reduce tax benefits for high-income households. This sets the stage for future balanced approaches to deficit reduction, which could include additional revenue through tax reforms that reduce tax benefits for Americans making over $250,000.
Will this change YOUR LIFE? Well, the answer is as always…..it depends. What is your ADJUSTED GROSS INCOME? Not your gross revenue. If you are a small concrete contractor who grosses a million a year in sales, chances are this law will not impact you. Painter, General contractor? Personal trainer? Your net after materials and labor is much lower then the thresholds mentioned above. If you are worried, contact a CPA. If you think your business is on the edge of that number and drastic changes are in order than call a lawyer. Don’t believe everything you hear on Fox news.
What will the new year hold?
If you are reading this, then you survived the alleged Mayan prediction about the end of times. Whew! Many people laughed about it but yet others are worried about the current presidential administration. We will plunge off of the fiscal cliff? What will happen to stock prices? Will taxes go up?
If you are one of many Americans living from pay check to pay check, it can only take one negative event to knock you out of your budget. Will your employer reduce your work hours? Hopefully not. But you have options if that happens. Chapter 13 bankruptcy is a reorganization that stops credit card interest, can reduce car notes if eligible and allow extra time to catch up on your house note if needed.
Chapter 13 is federal law which supercedes state law and can allow surprising changes in your current contracts. If you have owned your car at least 910 days then you can strip down the amount you must repay your creditors.
Bankruptcy is not the end of the world. It can be a fresh start for people who have felt like they are running in place financially. Explore your options. Consultations are free.