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Cleveland TN Bankruptcy Law Blog

Survey: 36% of college students held back by credit card debt

Credit cards are convenient ways to purchase goods and services when you don't yet have the cash on hand to pay for them. But credit card companies aren't acting out of the goodness of their hearts when they give consumers this convenient tool. They make money by charging interest.

When consumers can't or don't pay off their balances at the end of the month, their unpaid balance gathers interest rapidly. The average annual percentage rate for credit cards is 17.73%, higher than the highest rates for private loans and more than double the rate for federal student loans.

Fighting wage garnishment

When you're deep in debt, it can feel like an impossible situation. You may have fallen behind on credit card bills, medical bills or other debts, but you're working and trying to save up the money to pay off your unpaid balance. And then, you see that one of your creditors is not going to wait. It has already started taking a chunk out of your take-home pay through wage garnishment.

Like many other states, Tennessee allows creditors to garnish the wages of workers who owe them money. All the creditor has to do is file a complaint against the person in court. The debtor must be notified of the lawsuit, but if they don't show up for a hearing, a judge can generally grant the creditor's request.

Bankruptcy may help you save your home

Residents of Eastern Tennessee who are experiencing financial troubles probably worry most about losing their homes. One of the most common questions regarding bankruptcy is whether the bank holding the mortgage on a home can commence foreclosure proceedings and reclaim the house. The answer to this questions is not a plain "yes" or "no." The answer depends upon many factors, including the type of bankruptcy petition that the homeowner files.

The bankruptcy code offers instant protection from foreclosure by requiring all creditors, including all mortgagees, to immediately halt collection on all debts owed. This procedure is called an automatic stay. Upon the filing of the bankruptcy petition, the court issues an order to all creditors directing them to stay collection proceedings. If a bank or other mortgagee has begun foreclosure proceedings, those proceedings must stop until the bankruptcy is completed.

The advantages of reaffirming a debt in a Chapter 7 bankruptcy

Most people in Eastern Tennessee think of bankruptcy as a method of discharging their obligation to pay back certain debts. Many people resist the idea of filing a bankruptcy petition because they are afraid that they will lose valuable possessions, most significantly, the family home. While understandable, this fear overlooks an important feature of the bankruptcy code: debt reaffirmation.

In a Chapter 7 bankruptcy proceeding, the debtor must allow the trustee to take possession of all property that is not covered by a bankruptcy exemption. The property is then sold, and the proceeds are paid to creditors. Whatever balances that remain due on these debts are then discharged by an order of the court. An important exception to this procedure is the reaffirmation of a debt that is secured by a lien on the debtor's property. The most common examples are the family home and automobiles. The debtor can retain possession of such assets by entering into a reaffirmation agreement with the lender.

How does the CARD Act protect Tennessee consumers?

Most people in Eastern Tennessee have probably never heard of the CARD Act, even though it contains some of the broadest consumer protection provisions in the United States Code. Even a summary understanding of the Act's provisions can help Tennessee consumers avoid burdensome credit card debt. The Credit Card Accountability, Responsibility and Disclosure Act was passed by Congress in 2009 in response to the Great Recession. The law clarifies certain portions of the Truth in Lending Act and adds a number of important protective measures.

The first section of the Act places limits on the rights of card issuers to change or manipulate interest rates on their cards. A card issuer must give customers 45 days advance notice of any change in interest rates that was not spelled out in the initial agreement. Any rate increase notice must also give the card holder the right to cancel their account. The Act also places additional limits on changes in payment dates and over-limit fees and prohibits charging special fees based on the method used to make payments on the card balance.

We help folks facing problems with credit card debt

Credit card debt can be easy to accumulate and very difficult to pay back. Unanticipated emergencies, unemployment and other unforeseen expenses can cause credit card debt to add up quickly. Events like holidays and other special occasions can add to the debt. Not too long ago, we discussed the impact of the holiday season on the average American's debt burden.

According to a survey, Americans accumulated on average more than $1,000 in new debt over the course of a recent holiday season. About 20% of Americans accumulated $2,000 or more during the holidays. Over two-thirds of those surveyed used a credit card or an in-store card to finance their debt. Over 60% of people in debt had not expected to take on debt at the start of the holiday season. Fewer than 50% of those surveyed thought they would have their debts paid within three months.

Sears shareholders sue former CEO, claiming he looted the company

The saga of the Sears bankruptcy is continuing with another lawsuit against the former chairman, Eddie Lampert, claiming that Lampert and his associates siphoned off billions of dollars in assets from the company and purposely drove it into bankruptcy. Sears stores were scattered across Rockland County and the state of New York, causing many to wonder how the chain could have failed. The plaintiff in the lawsuit, Sears Holdings Corp., is overseeing the liquidation of Sears' assets and is representing the interests of the company's shareholders.

Lampert and his company, ESL Holdings, purchased $5.2 billion of Sears' assets during the company's commercial bankruptcy at a price many assumed was an overly steep discount. Sears Holdings Corp. alleges that Lampert and his associates began to implement a plan in 2011 to sell the firm's assets at deep discounts to pay the company's operating expenses with no explicit plan to return the firm to profitability. The plaintiff also claims that but for the defendants' illegal actions, Sears would have retained enough cash to pay its third-party creditors and would have been able to avoid the disruption of bankruptcy.

Discounter Fred's begins closing stores and selling off inventory

Another discount chain that depends upon brick and mortar stores is beginning the process of closing outlets and selling off its merchandise. The chain is Fred's, a chain based in Memphis.

In a statement issued last week, the chain announced that it plans to close 159 underperforming stores by the end of May and to evaluate strategic alternatives. The chain also announced that it has retained an advisory firm to assess its options and help it maximize value as it restructures. Fred's also hired two liquidation firms to provide assistance in the downsizing process. The president of the company said that a 4.9% drop in sales in the first nine months of 2018 caused its executives to search for a more rational footprint by closing underperforming stores. The company's shares also lost 5.8% of their value.

How bankruptcy can get creditors off your back

Many people in Eastern Tennessee have heard that a bankruptcy petition can prevent harassment by aggressive creditors, but very few understand how this happens. The answer is an automatic stay.

The automatic stay is found in the U.S. Bankruptcy Code at 11 U.S.C. ยง362. This section states that a bankruptcy petition automatically operates as a court order. The order states that all creditors shall immediately cease all attempts to collect debts owed to them by the debtor. The order specifically applies to lawsuits, attachment of wages and attempts to perfect or enforce any lien. Creditors who do not obey the order may face significant sanctions from the bankruptcy court. Because the order is automatic, creditors are immediately shut down in their efforts to collect debts.

How does bankruptcy affect a person's credit rating?

Most people in Eastern Tennessee contemplating bankruptcy are aware that they have credit scores that are used by potential lenders to determine whether the person should be loaned money and what interest rate they should be given. The uncertain piece of the puzzle is the effect the bankruptcy filing has on a person's post-bankruptcy credit score.

In the United States, three credit rating bureaus keep track of how well individuals pay their debts. Each person in the system is given a score based upon their promptness in repaying their loans. A credit score of 780 is deemed to be excellent, and a score of 680 is deemed to be fair. The maximum score is 900. Most lenders would use a score of 780 to lend money with little or no question and give a low interest rate.

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