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Credit Card Debt and Bankruptcy

Credit Card Debt and Bankruptcy

Credit card debt is a significant problem in the United States. Americans owed over a trillion dollars in credit card debt in 2019.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 put federal rules and regulations on the use of debit cards. Financial institutions have lost income due to excessive bank fees no longer being allowed. Consumers must agree to overdraft before they can be charged an overdraft fee.

Encouraging Credit Cards

Banks are encouraging shoppers with great promotion rates, and 0% offers to obtain new credit cards. Banks receive more profit from credit card usage, than from debit cards. If consumers are hooked on credit cards, banks can replace the debit card usage fees in overdraft charges for interest rates and fees on the credit cards.

Cycle of Debt

One of the most common causes of financial issues is credit card debt. It can start a cycle of purchasing everyday items on your credit card when you have run out of paycheck. You tell yourself you will pay the balance at the end of the month, but often only the minimum amount due gets paid.

Bankruptcy can help you eliminate your credit card debt and stop the harassing phone calls and texts and emails regarding your credit card debt. A court order called the automatic stay protects you from any further collection activities while your bankruptcy case is active. If the creditor does not stop collection attempts made against you, you can take them to court, and they may be found in contempt and face penalties.

Contact a Roseville bankruptcy attorney to find out how you can eliminate your credit card debt today.

Bankruptcy and Your Credit

Bankruptcy and Your Credit

People are often hesitant about filing bankruptcy because of what it will do to their credit. They know that a bankruptcy can stay on your credit report for ten years. They should also consider that being behind in their payments can cause a negative impact on their credit report.

Things like late payments, over the limit balances, default on payments, foreclosures, evictions, repossessions, all stay on your credit report for at least several years. Prospective lenders will not look favorably on these negative marks and would weigh them along with a bankruptcy in terms of credit favorability.

If you are overwhelmed with debt, your credit score may not be the most important thing to worry about right now. If a lender sues you for nonpayment, it may be able to get a court-ordered judgment against you. This can involve a lien on your home or wage garnishment. None of those actions taken against you will help you get out of debt.

Bankruptcy

Instead of ignoring the calls and letters from creditors, you may want to consider filing bankruptcy. The creditors won’t go away, but bankruptcy can eliminate the legal obligation to pay on much of your debt. Your unsecured debt like credit cards, medical bills, payday loans, past utility bills, and personal loans can all be discharged in as little as four to six months in a Chapter 7 bankruptcy liquidation.

Saving your Home

If you have received notice of an upcoming foreclosure sale, a Chapter 13 bankruptcy may help you keep your home or other secured debt like a car. You can attempt to retain your assets in a Chapter 13 bankruptcy case if you are able to pay the arrears with a court-approved payment plan for three to five years. At the end of the payment period, any remaining unsecured debt will be eliminated.

Getting Credit

If, after bankruptcy, you pay your bills on time for a couple of years and do not acquire more debt, lenders will start to look more favorably on you when you apply for a loan. By avoiding the “No Credit, Bad Credit, Ok” lenders with their high-interest rates and unfavorable terms, you can set yourself up for better credit opportunities in the near future.

If you have more questions about your credit and bankruptcy, contact an Elk Grove bankruptcy attorney today.

Credit Card Debt in Chapter 13 Bankruptcy

Credit Card Debt in Chapter 13 Bankruptcy

Credit card debt is one of the most prolific types of consumer debt in California. In fact, the total credit card debt in 2018 for Americans exceeded $1 trillion. For the first time in history, this equates to an average household credit card debt figure of over $8,600. As such, individuals commonly approach a California bankruptcy attorney to discover if Chapter 13 bankruptcy can help them with troublesome credit card debt. Chapter 13 bankruptcy, or "reorganization bankruptcy" allows an individual to establish a repayment plan while eliminating or discharging any remaining amount at the end of that repayment plan. A Chapter 13 discharge can be quite helpful in dealing with excessive credit card debt.

How Credit Card Debt is Prioritized

Chapter 13 bankruptcy is helpful in eliminating credit card debt because of its ability to reduced unsecured debt within the US Bankruptcy Courts. When you file for bankruptcy in California, the bankruptcy trustee divides up your debt into three different debt classifications called priority debt, secured debt, and unsecured debt. This is the actual order that you must pay your debt, with priority debt and secured debt repayment being required. You pay back unsecured debt last but only if you can still afford to do so. Credit card debt falls into the category of unsecured debts, although some credit card companies can and will create credit agreements which are secured. For this reason, read your original credit card agreement to ensure that it is, in fact, an unsecured agreement.

How Much Credit Card Debt is Paid Back

How much credit card debt you will have to pay back in Chapter 13 bankruptcy depends on how much money you earn before and during your Chapter 13 repayment period. Your credit card debt repayment amount is also contingent on the amount of priority debt and secured debt you owe. To calculate how much of the credit card debt you will be liable for in Chapter 13 bankruptcy, look at your overall budget. Consider how much you can afford to pay based on income and expenses and deduct the amount of priority debt and secured debt that you intend to pay in the future. Any money left over from your Chapter 13 repayment amount goes toward paying back your unsecured debts. The balance between this amount and your credit card debt is discharged at the successful conclusion of your California bankruptcy.

Avoiding Lawsuits

Creditors have the right to file a lawsuit against consumers to force them to repay a debt by obtaining a judgment in a civil court. If you are currently being sued over a credit card balance, time is of the essence. Filing bankruptcy offers a consumer an automatic stay which can stop a credit card debt lawsuit in its tracks, but it is much easier to discharge this debt using bankruptcy than it is to clear up a lien on your property because of a judgment. Contact a Sacramento bankruptcy attorney if you have received a summons to court because of credit card debt to avoid further adverse actions.

Credit Card usage before Bankruptcy

Credit Card usage before Bankruptcy

A typical question we hear revolves around credit card usage before bankruptcy. Specifically, individuals want to know how using a credit card with the months leading up to filing for bankruptcy protection can affect the filer’s ability to discharge the debt. This is something that is very strongly discouraged as getting cash advances from credit cards, or using your credit card to charge luxury items may be exempted from discharge during your bankruptcy, leaving you stuck with the bill. The U.S. Bankruptcy court generally considers purchases over $675, “luxury items”.

Intent to Pay

If you use your credit card with no intent to pay for the items, the law presumes that these charges are fraudulent. Items obtain using fraud are not dischargeable in a bankruptcy, and it is much easier for a creditor to prove in a court of law that you never intended to pay for luxury items that were purchased using a credit card within 90 days of filing bankruptcy. The only way that this type of purchase can truly be discharged, is if an unforeseen life event pushed you into bankruptcy after making the purchases.

Cash Advances

When filing for bankruptcy protection, any cash advances totaling more than $950 within 70 days of bankruptcy may be exempted from discharge as well. The total amount must have come from one creditor and must have been used for consumer purposes and not business related. If these two standards aren’t met then the debt may be dischargeable.

Credit Card Debt in Bankruptcy

Credit Card debt in bankruptcy is typically the lowest priority for repayment, however, any debt incurred with your credit card debt by fraud will have to be repaid. It’s important to note that even if you didn’t intend to defraud your creditors by spending money on your credit card before a bankruptcy, the court may be inclined to believe that you have committed constructive fraud and will require you to pay back the credit card debt.

If you have made a number of purchases or taken out cash advances on a credit card it is typically a good idea to stop charging and wait before declaring bankruptcy. It’s important to discuss your credit card debt thoroughly with your Sacramento bankruptcy attorney before filing, in order to have a greater chance of your bankruptcy case being confirmed. Additionally, it’s important to be completely honest about your debt with your bankruptcy lawyer, as well as, the bankruptcy trustee in order to prevent your bankruptcy case being dismissed completely.

How to Defend Against a Credit Card Debt Lawsuit

How to Defend Against a Credit Card Debt Lawsuit

Many individuals struggle with massive amounts of credit card debt. It typically begins when you miss a payment or two, and then start to fall more and more behind. The interest on the debt rises and before you know it, you have a giant credit card balance and no way to get caught up. Many times credit card companies will do their best to work with you, but if you stop paying the credit card all together, the creditor has the right to file a lawsuit against you. If you want to defend against a credit card debt lawsuit, you need to know the process that takes place and what steps you can take.

How Credit Card Lawsuits Happen

When you stop paying credit card payments, you are violating the original agreement you signed when you took out the line of credit. In many cases, the credit card company will actually sell your debt to a third party, debt buyer, mitigating the credit card company’s losses and making the debt collection firm the legal owner of the debt. The debt collection buyer will attempt to collect the debt from you and if unable to do so, will turn the matter over to an attorney who will file a complaint in the county you live in. You will then be left to file an answer to that complaint stating that you either admit or deny the debt.

Defenses to the Credit Card Lawsuit

If you deny the statements of the credit card company or debt buyer’s compliant, you are stating that the contents of the complaint are inadequate, the debt is too old, the credit card company failed to “state a claim”, or that proper notice of the lawsuit wasn’t given. By claiming that any of these situations are the case, you are raising what is called an affirmative defense to the lawsuit. With an affirmative defense, you are essentially arguing that even if everything is true, the lawsuit should be thrown out. The first step in collecting the necessary information you need is to file a discovery request with the courts. A discovery request asks the credit card company to provide information such as the original contract you signed, and other information pertinent to their lawsuit. This information can be used to further argue your case in some instances.

Outcomes of Credit Card Lawsuits

There are three primary outcomes that can arise from a credit card lawsuit. The best-case scenario is that the court rules in your favor and the credit card company can’t legally collect the debt from you. The court, however, may rule in favor of the credit card company and when this occurs they are awarded a judgment against you for a specific dollar amount. The credit card company can then proceed with a request to collect the payment that can include wage garnishments, property liens, and property seizures. The court may also dismiss the case, which can occur if the company wasn’t able to provide you with all the documents pertaining to your debt. If this happens, the credit card company can re-file a lawsuit later if they are able to correct the errors from the first case, so it’s important to ask the courts to dismiss the case “with prejudice” in order to prevent future credit card lawsuits involving the same debt.

Being sued is no light matter, and you should immediately work to defend yourself by hiring a Sacramento bankruptcy attorney familiar with debt relief if you receive a summons for a credit card related debt. There are many things that can be done, but you can’t bury your head in the sand and hope that the problem resolves itself.

Score Improving Credit Repair Solutions

Score Improving Credit Repair Solutions

Living with a poor credit history in the US is pretty tough to deal with. Bad credit will  make a lot of things including insurance, utilities, loans fairly expensive for you to procure. Here are a few effective score improving credit repair solutions. These will not only help you improve your FICO scores, but also make life easier in general.

Score Improving Credit Repair Solutions

  • You can repair your credit score only when you are aware of what lies on your report. Check by requesting a copy of your latest credit report from any of the three credit bureaus. Analyze your report to determine all the financial pitfalls that have contributed towards your bad credit. Also, you can review your report for any false listing of late payments or inaccurate information that might be affecting your score.
  • The truth is that a good 35% of your credit score is influenced by your payment history. Therefore, you must take care of your past-due accounts on priority. It is important to change their status to ‘current’ or at least ‘paid’. Whether charged off or not, clear off all your delinquent accounts. This will help you obtain a favorable account status that no longer hurts your credit score.
  • Late payments end up showing as a blot on your credit report. On the other hand, timely payments will help make it spotless. Once you have cleared all your past dues, you can go ahead and work towards adding positive information. You can do this by taking out a fresh credit such as a loan or a credit card.

Remember, taking care of your finances as they come is the best strategy. It is a far better than ending up with delinquent accounts and a tarnished credit report. Repairing a credit report takes time and effort. but is possible. Your score can even be repaired following a Sacramento bankruptcy if done the right way.