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Tyler Texas Bankruptcy Law Blog

Consumer debt reaches new heights, but Chapter 7 may help

Many people in Texas may feel like the days of the Great Recession are long gone, and they may be right. After all, it sounds like the economy is humming along. Unemployment is down, wages are up slightly and consumers appear to be generally optimistic. Despite that perception, however, many individuals, are still struggling to get by.

In fact, a recent study found that consumer debt continues to rise to historic levels. According to reports, this debt level has risen to $13.7 trillion, spurred on by $10 trillion in mortgage debt and $1.5 trillion in student loan debt. Other personal debts contribute to this huge burden, too, including medical debt and credit card debt.

Is your debt under control? Are you sure?

When you go to sleep at night, what is the last thing you are thinking about? What is your first thought when you get up in the morning? Is there one thing that wakes you in the middle of the night and causes you to worry? If your debt is the thought that keeps you awake at night and follows you through the day, you are not alone.

While you may spend your time trying to figure out how to pay this bill or that loan, do you understand the seriousness of your situation? Perhaps, most of the people you know are also feeling anxious about their financial circumstances, but does that mean they are in trouble? While everyone's financial issues are different, there are some signs that may indicate yours are more serious than you think.

New law to protect debtors from some debt collection practices

It can be scary to face debt collectors. Creditor harassment is real, and it often leaves Texans on the edge of their seat frightened for their financial future. These debt collection practices may involve threats, late night phone calls and even personal visits that are intimidating in nature. The whole debt collection process can be embarrassing, too, especially when others find out about it and an individual continues to struggle to make payments.

Fortunately, a recently signed bill right here in Texas may help alleviate some debt collection practices. The law, which goes into effect in September, prevents a debt buyer from suing an individual in an effort to collect debt after the statute of limitations has run, which is currently set at four years after the most recent payment on the debt. Even if a debtor makes a payment on the debt after the statute of limitations has run, the debt buyer cannot restart the clock and initiate an action. The new law also specifies that if a debt buyer tries to collect a debt where a formal action is barred, those efforts can only occur after written notice is provided to the debtor notifying them of the legalities of the matter.

Personal loans can't always eliminate debt

Facing overwhelming debt can be terrifying. Not only can it prevent an individual from reaching important milestones, such as buying a house or getting married, but it can also affect one's day-to-day life. Far too often, Texans struggle to make ends meet as they fight to stay on top of their debt. This is simply unacceptable and it's no way to live. That is why these individuals need to carefully consider their debt relief options.

Some people try to pay off debt by consolidating it through a personal loan. These loans are not secured by property. This means that an individual who is unable to repay a personal loan will not have their property repossessed. However, because these loans are unsecured the interest rates associated with them are often much higher. This can make it even more challenging to pay off the loan's principle.

Chapter 13 bankruptcy exemptions

Many Texans who are struggling with debt make too much to qualify for Chapter 7 bankruptcy. As a result, these individuals may need to turn to Chapter 13 bankruptcy to find debt relief. This type of bankruptcy allows an individual to eliminate some debts after successfully adhering to a payment plan for a specified period of time. But how does a bankruptcy court determine how much a Chapter 13 filer must repay under his or her bankruptcy plan?

To start, a court will look at the debtor's assets. The value of nonexempt property serves as a starting point, or minimum, that must be repaid under the bankruptcy plan. Therefore, the valuation of property becomes critically important. Valuing property too high may set a debtor up for a failed bankruptcy.

What can you do when debt collectors step over the line?

Owing a significant amount of debt can have various negative implications for your life. In addition to the fact that you have bills you cannot pay on your own, you may also be dealing with calls from creditors, letters in your mailbox and more. These attempts to collect on what you owe can add additional stress to an already difficult situation. 

There are times when creditors and debt collectors may step over the line when dealing with Texas consumers. These individuals can do their job, but they cannot harass you or act in certain ways toward you. You have protection against harassment and illegal treatment under the Fair Debt Collection Practices Act. This act prohibits predatory practices, and it is smart to understand what this law means for you.

Chapter 7 can ease debt burden to help address student loans

Previously, this blog discussed the difficulties of trying to discharge student debt, and the fact that many older Americans find themselves saddled with burdensome student loans. A new report is again highlighting the financial struggles student loan borrowers are facing.

According to figures from this year, Americans currently hold about $1.5 trillion in student loan debt. The average college graduate who had to take out student loans graduated with nearly $30,000 of debt. One study found that this student loan debt load is 300% higher than what their parents faced when they graduated from college. As a result, many younger Americans are putting off important milestones like getting married, buying a house and starting a family.

Military families turning to payday loans more frequently

Although the economy appears to be steadily improving, the stark reality is that many Americans continue to struggle with personal debt. As a result, many are living paycheck-to-paycheck, and any unexpected expense can quickly derail their already tight budget. One option individuals often turn to for assistance in combating these unexpected expenses is payday loans, which can quickly turn into a debt spiral.

Sadly, military families appear to be turning to payday loans with more frequency than ever before. In fact, a recent study found that the number of military families turning to these loans has doubled over the last five years. This is problematic because the sometimes triple-digit interest rates can quickly balloon the amount to be repaid. This may not be too big of a deal if an individual truly just needs to bridge a gap until the next pay period at which time he or she will repay the loan. But the truth is that many keep turning to these loans and are unable to repay them in a quick fashion.

Confirming the Chapter 13 bankruptcy plan

Living with debt can feel overwhelming and endless. One may feel like he or she will never find financial relief, but filing for bankruptcy could be the answer. Chapter 13 bankruptcy is centered on a repayment plan that, overtime, seeks to repay creditors as fully as possible. However, many individuals who successfully pursue Chapter 13 have a significant number of debts discharged once their repayment plans are completed. While this is great for a debtor, it can be terrible for creditors. As a result, they often have an interest in the terms of a debtors repayment plan. To ensure that the process and the bankruptcy plan is fair, it must be confirmed by a court of law.

Before the court will confirm a bankruptcy plan, though, it must consider a number of factors. Obviously, the plan has to conform to bankruptcy laws, but it must also be made in good faith and the petitioner must show that he or she is capable of making all payments under the terms of the plan. Special consideration must also be given to creditors with secured claims. These are usually debts that are backed by collateral. Generally speaking, a bankruptcy plan will only be approved if a secured creditor approves of the plan or the debtor releases the asset to the creditor. The plan may also be approved with regard to secured creditors if liens are in place.

The writ of garnishment and bankruptcy

Falling behind on debt payments can lead to a cascade of unwanted actions being taken against you. To start, creditors may harass you in an attempt to recoup the debt. Although there are certain laws placing limits on how far these creditors can go in their attempts to collect payment, they often overstep. If that harassment isn't enough, you may also find yourself subject to garnishment, which can really turn your financial well-being upside down.

A writ of garnishment is a legal judgment that creditors obtain that essentially redirects debtors' money to them without any action on the debtors' part. Although wages earned from an individual are exempt from these writs, a creditor may seek to garnish an existing bank account. This means that this bank account can be drained, and any wages deposited into it can be taken by a creditor to satisfy any outstanding debts.

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