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San Francisco Bankruptcy Law Blog

New credit reporting rules may help California residents

After reaching a settlement with authorities in New York state, Equifax, Experian and TransUnion have agreed to change the way medical debt may impact an individual's credit score. In the future, the major credit bureaus will wait 180 days after a medical debt goes into collection before listing it on a credit report. This gives the insurance companies time to pay any portion of the debt that they may be liable for.

According to research done by the Consumer Financial Protection Bureau, an unpaid medical debt may be the sole blemish on an otherwise stellar credit report. Additionally, many who study this issue believe that unpaid or otherwise unresolved medical debts are unlikely to predict a person's overall creditworthiness. In many cases, those who have medical debts go into collection didn't even know that they owed any money.

Bankruptcy may be best for future retirement savings

Bankruptcy is often spoken of by many California residents as a last resort when it comes to cleaning up personal debt. While there are many reasons for believing this to be true, it may make more sense as a possible first and best option in some cases, especially when retirement must be funded.

The notion that bankruptcy is reserved for the last solution to a big debt problem may be outdated. As some financial experts point out, paying off debt slowly instead of placing those payments into an account designed to fund future living expenses may be less than desirable. Their theory focuses on the fact that a generation of people who have paid off their debts, but are now retired and need to be taken care of, will put an undue burden on society as a whole.

Supreme court rules on bankruptcy appeals case

Debtors in California may be interested in hearing about a Supreme Court decision that will impact the ability for people seeking Chapter 13 bankruptcy to appeal denials. The high court's May 4 ruling will have a wide-reaching impact on debtors throughout the country. In the decision, one of the justices expressed that an appeal would hold up the payment process and impede creditors and debtors from working together to come to an agreement. During the bankruptcy process, debtors are given a stay where creditors cannot take legal actions against them or ask for the debts owed.

A debtor from Massachusetts attempted to appeal the denial of a plan that would have allowed him to have a certain portion of his mortgage as an unsecured debt. This would mean that his payments for a certain amount of his mortgage would be based on his income. He would have ended up paying $5,000 of a $101,000 debt. The other portion of his mortgage would be secured, meaning he would have to pay the full amount due over time. The appellate court agreed with the circuit court's decision that his plan did not fit within the regulations of the Bankruptcy Code.

Debt may interfere with retirement plans

As some California residents know, many individuals are pushing back their retirement date due to debt. Recent studies of those nearing retirement age indicate that the level of debt in this age group has increased. Financial advisors are telling clients to rid themselves of debt, in part or in full, before they retire.

According to a 2010 research study, families whose head of household was 55 to 64 held the greatest amount of debt. The average debt for such families was $107,060. Another study in 2011 showed that mortgage debt increased by about 8 percent from 2001 to 2011 for those individuals 65 years old or older. As the age increases past 75, the rate doubles.

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.