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San Francisco Bankruptcy Law Blog

Bankruptcy and home ownership in California

Despite filing for bankruptcy, it may be possible for a homeowner to keep his or her home. However, it may be necessary to walk away from the home due to financial issues that may make it hard or impossible to keep making that payment each month. For those who want to walk away from their home during a bankruptcy, there is a way to do it.

Before learning how to walk away from a home after filing for bankruptcy protection, it is important to know what type of bankruptcy is involved. For those in a Chapter 13 repayment plan, a homeowner would have to ask for the case to be dismissed and then try to strike a deal directly with creditors. Homeowners who are current on their mortgage may not even list it in their bankruptcy case as it deals with unsecured debts.

Discharging private student loan debts in California

Although most people feel that it is impossible to discharge student loan debt in bankruptcy, that may not always be true. In some cases, a creditor may not be able to collect private student loan debt once the statute of limitations has passed. For those who do choose to seek discharge of student loan debt through bankruptcy, what do they need to do to be successful in their endeavor?

The first step is to determine whether or not the school was accredited. If it wasn't, it may be possible to have the loans eliminated in Chapter 7 bankruptcy rather quickly. This is because they are not considered to be loans related to higher education, which means that they are not private student loans as defined by the bankruptcy code.

Understanding the law surrounding credit card rate increases

San Francisco residents who are seeking debt relief may be interested in some information about credit card rate hikes. Though there are laws in place to protect cardholders, the card issuers still have options for raising rates.

Credit card company American Express has announced that it will be raising interest rates for around one million cardholders. While 2009's CARD Act restricted the ability of credit card companies to do so, there is still the possibility for these rates hikes to be allowed.

The impact of vulture capitalists on California residents

The economic hard times that millions of Americans have dealt with in recent years have led to the rise of debt buyers. Otherwise known as vulture capitalists, they buy debts from banks and other lenders for pennies on the dollar. After they have acquired the debts, they then go after the debtors and attempt to collect on the debt. If it is not possible to get the debt voluntarily, they then turn to the legal system.

Thousands of lawsuits are filed daily against people who don't have the ability to take time off from work to appear in court. Those who may be able to appear in court don't have the money to hire a lawyer. Therefore, 95 percent of these cases result in a default judgment against the debtor. The debt buyer then has the legal right to garnish wages or seize bank accounts to collect on the debt.

Inability to sue credit card companies

Credit card debt is a significant problem for many Californians, and debt can quickly balloon when credit card companies charge additional fees or change interest rates. Even if a credit card company engages in actions that might constitute the basis for a lawsuit, however, most companies have mandatory arbitration clauses in their credit card agreements, preventing consumers from suing in court.

In a study performed by the Consumer Financial Protection Bureau, it was shown that arbitration regarding credit card debt strongly favors the company over the consumer. The CFPB reviewed data from 2010 to 2012 in 1,847 cases. Out of the 1,060 filed in 2010 and 2011, arbitrators ordered consumers to pay more than $2.8 million to the companies while awarding consumers an aggregate of less than $175,000 in damages. Consumers were also awarded less than $190,000 in debt forbearance through arbitration.

Recent trends concerning credit card debt

Debtors in California might be interested learning more about how American consumers accumulated more than $57 billion in credit card debt during 2014, accounting for a 47 percent increase from the previous year. A recent survey suggests that U.S. consumers' confidence has grown, and that more people are being compelled to start spending money again. However, the funds are being spent in greater amounts than many of these consumers can currently afford.

The net credit card debt in the country has now increased for five consecutive years. Hardships created by the financial crisis and subsequent recession compelled many consumers to reduce their spending and prioritize paying off their debts. Since confidence has mostly been restored, many consumers have been reallocating their funds back into new purchases and away from paying off outstanding debts. According to the data collected, consumers added $45 billion during the fourth quarter, and the U.S. is expected to exceed $60 billion in credit card debt for 2015.

A look at the differences between types of personal bankruptcy

San Francisco residents who are dealing with serious consumer debt may be interested in some information on the types of bankruptcy available. While many know that they should be filing for bankruptcy, it can be difficult to understand the difference between the two major types.

The first type of bankruptcy available to individuals is known as a Chapter 7 bankruptcy. To qualify for Chapter 7, the person must have an income level below a certain threshold. If they do, the Chapter 7 bankruptcy will allow them to have their debts discharged at the conclusion of the bankruptcy proceedings, with some exceptions. Certain assets must be surrendered to the court and liquidated to pay off creditors. However, after the bankruptcy is concluded, the creditors cannot file any collection actions against the person.

When Chapter 11 is right for a California business

When an individual files for bankruptcy, he or she may opt for Chapter 7 or Chapter 13. While a business may also be able to file for bankruptcy under these chapters, it often makes more sense to do so under Chapter 11 bankruptcy. This is generally referred to as business bankruptcy, and it gives the company time to reorganize its debts and other obligations.

There are several benefits for a company that files Chapter 11 bankruptcy. First, it may be granted an automatic stay of creditor actions. It may also create a plan that will get the business back to profitability in the proceeding 120 to 170 days. However, creditors may have some influence in how the plan is written. Furthermore, they may be allowed to write a plan if the business owner is unable to.

Credit card debt and unexpected bills

A financial situation involving a substantial amount of credit card debt and little to no savings can be frustrating. When faced with unexpected expenses, California residents may question how they can afford necessary services for themselves and their family members.

The two most common unanticipated emergencies involve car repairs and medical costs. Because these two groups of expenses can be non-negotiable, a person with a lot of credit card debt may not have options for payment. Maxing out credit cards means that there is no credit line available, and if emergency savings are non-existent or not enough to cover the amount, a person may have no options for funding predictable situations.

Medical debt and bankruptcy options

California individuals who are facing medical debt are not alone. Almost half of all collections are for medical debts, and many Americans face lower credit ratings as a result. Some consumer advocates feel that medical debt is a poor assessor of risk and should not be included in credit reports, and while some reporting agencies are changing their policies in this regard, consumers must be vigilant about not letting this type of debt spiral out of control. A collections item can lower a FICO score by up to 100 points. However, debts under $100 do not affect the FICO score.

Another point consumers should keep in mind is that medical debt is often assigned incorrectly. One debt collection agency founder estimates that they receive incorrect medical bills about 20 percent of the time. For some, insurance should have covered the bill and did not. In other cases, patients are either being billed for things never received or overcharged.