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Tyler Texas Bankruptcy Law Blog

A recession could impact those who have credit card debt

Many people in Texas have credit cards. They use them for large purchases, everyday expenses and even as a sort of emergency payment plan. Credit cards can be quite useful, but they can quickly lead to trouble. Currently, Americans are accumulating credit card debt at a fast pace, and this could cause problems down the road.

Many experts have been pointing to a potential recession in the next few months. It is normal for the economy to fluctuate from time to time, but this could have a more direct impact on you than you realize. Some people suggest that a recession could spell bad news for people who have a lot of credit card debt. It may be smart to learn more about how you can prepare well and look ahead to possible solutions. 

Medical debt can be subject of aggressive debt collection tactics

Medical debt is one of the biggest driving forces behind bankruptcy filings. Sadly, many people who seek out healthcare don't know the true expense they face given that medical costs and insurance policies are often cloaked in secrecy. Very rarely can an individual obtain an accurate estimate of his or her medical expenses before they are incurred. This often means that while people may be doing what is best for their health, they may be wreaking havoc on their financial future.

Since many of these medical debts are exorbitant, a lot of Texans are unable to pay them. When these individuals don't make good on their medical debts, hospitals often send those accounts to collection agencies or sell them to debt collectors. These debt collectors can then go to extreme measures in an attempt to recoup balances owed, including utilizing social media as a way to connect with and track down those who owe.

More elderly individuals seeking bankruptcy protection

Debt knows no bounds. Anyone can be hit with unexpected expenses, whether they are for medical treatment, to repair much needed transportation, or to make home repairs that are necessary to keep a residence habitable. Although some people are able to dig themselves out debt, others struggle to do so and instead find themselves falling deeper and deeper into a debt spiral.

Sadly, this seems to be happening to more elderly individuals. These individuals are now making up a larger portion of personal bankruptcy filers than in years past. In fact, according to a recent study, elderly individuals now file 12% of all bankruptcy petitions, which is up from 2% in 1991. This means that more than 130,000 individuals over the age of 65 are seeking bankruptcy protection.

Reasons why a Chapter 7 discharge may be denied

As we've mentioned previously on this blog, bankruptcy is not automatic. That is to say that the mere act of filing a bankruptcy petition is not enough to secure the fresh financial start that many petitioners seek. In fact, there may be some situations where a bankruptcy petition is contested, especially by creditors who seek to recoup their financial interests. While the vast majority of those who seek a Chapter 7 bankruptcy are either successfully discharged or have their bankruptcy converted to another form, there are still ways that bankruptcy discharge can be denied.

To start, it is worth noting that denials of Chapter 7 bankruptcy discharge are pretty rare. However, to avoid becoming an exception to the rule, Texans need to ensure that they understand how to avoid pitfalls that can lead to discharge denial. Probably one of the most common reasons for a denied discharge is improperly kept financial records. The courts will view this act as trying to hide assets to avoid the liquidation process, which therefore unfairly cheats creditors out of the funds to which they are entitled.

Rely on the FDCPA to stop creditor harassment

Far too many Texans are overwhelmed with debt. Regardless of how they ended up in that position, they don't deserve to be subjected to seemingly endless creditor harassment. Yet, despite valiant efforts by state and federal regulators, many of these debtors are subjected to annoying, and sometimes frightening debt collection practices. This is why those who are struggling with their debt may want to ensure that they are familiar with the protections afforded by the Fair Debt Collection Practices Act. Doing so may end creditor harassment.

Under this federal law, creditors are extremely restricted in the ways that they can contact a debtor. For example, without consent of the debtor or a court order, a creditor cannot contact a debtor during inconvenient times and at inconvenient places. If a creditor doesn't know what constitutes an inconvenient time, then the law specifies that contact can only occur between 8 a.m. and 9 p.m. Also, creditors are not allowed to contact a debtor at his or her place of work, and if the debtor is represented by an attorney then communications must pass through that legal representative.

Personal bankruptcy filings increase in July

Although there has been a lot of talk lately about the improving economy, many Americans are still struggling with debt. In fact, The American Bankruptcy Institute found that bankruptcy filings increased by 5% in July compared to June. That amounts to more than 64,000 bankruptcy filings last month alone, with over 450,000 petitions being filed so far this year. So that means that Texans who are finding themselves overwhelmed with debt certainly aren't alone.

There may be several reasons for the increase in bankruptcy filings. Many people who wind up filing for bankruptcy do so because they have been hit with unexpected and significant expenses. Medical expenses often spur bankruptcy petitions, especially when individuals have seen a lapse in insurance coverage or they have lost their job.

Is your credit card use causing more harm than you realize?

It may seem as if everyone these days has at least one credit card. Though many people use these cards for various reasons, they can have their pros and cons. For some Texas residents, using a credit card may help them make an important purchase while allowing them to pay it off over time, and for other individuals, having a credit card may only result in their spending getting out of hand.

If you land in the latter category of credit card users, you could quickly find yourself in financial trouble. Of course, at first, you may not think that your money problems are causing any real issue, but you could end up not being able to make your monthly payments and facing creditor calls.

Auto loan debt on the rise, as are subprime auto loans

A few weeks ago on the blog we discussed how consumer debt is continuing to grow. One of the major driving forces behind this debt is auto loans. The average cost of a new car today hovers around $37,000, which is more or just slightly less than many Texans make per year. This means that financing is usually required for both new and used vehicle purchases, which has driven up automotive loans by 75% since 2009. In total, Americans owe about $1.2 trillion in auto loan debt.

These figures have some financial experts worried. Particularly worrisome is the fact that, since lending has loosened up, many of these auto loans are considered subprime. This means that loans were given to individuals with credit scores below 620. These buyers are less likely to be able to afford their loans, which increased the chances of loan default. If a lot of these purchasers end up defaulting on their loans, lending standards could tighten again, thereby shutting some people out of the market and increasing costs for others.

New debt relief apps may be as dangerous as payday loans

Many Texans are struggling to get by financially on a day-to-day basis. For these individuals, the wait until their next paycheck can be grueling. In many instances they are just one unexpected expense away from financial catastrophe. Many people in such circumstances have tried to find debt relief through personal loans or payday loans. Payday loans have come under intense scrutiny lately, though, because of their high interests rates and the vicious debt cycle they perpetuate.

As payday lenders are losing their luster, new debt relief companies are filing the void. Amongst them are apps that provide funding to bridge the gap between paychecks. While that may sound like what a payday lender does, there is a distinction. These apps don't impose a fee for the funds they provide. However, they do allow a consumer to tip. One of these apps, Earnin, defaults to a 10% tip, but this tip can be adjusted to 0%. Many consumers feel that a 5% or 10% tip is reasonable, but digging deeper into the numbers highlights some concerns with these apps.

Chapter 11 and the written disclosure

Entrepreneurs in Texas take a lot of risks. Chief amongst these risks are those that are financial in nature. A business typically has to rely on some sort of financing or investment to get off the ground, and expansion typically requires additional lending. In order to make good on these debts, a business has to have a strong bottom line. Yet, in many instances, businesses see shrinking markets, diminishing margins and difficulty making ends meet.

When businesses find themselves facing overwhelming debt, they may choose to seek debt relief through Chapter 11 bankruptcy. Through this type of bankruptcy, a business creates a reorganization plan that seeks to make the business profitable again. This may mean reducing costs and seeking new areas of revenue. If the plan is carried out as agreed to, then certain debts are discharged, thereby breathing a breath of fresh financial air into the business's life.

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