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Dayton Bankruptcy Law Blog

Creditor inaction may constitute violation of automatic stay

When a person files a petition for bankruptcy in Ohio, all creditor collection actions must cease. This is because filing for bankruptcy triggers an automatic stay, and creditors who violate it are subject to punishment under the law. Courts are divided on whether or not creditors must unwind ongoing collections cases when the debtor files for bankruptcy. Some say inaction on the part of the creditor, leaving the pending case wherever it happens to be, is fine. Others, including a recent bankruptcy court decision, have said the creditor must make affirmative efforts to prevent ongoing collections.

In order for a party to prove that the automatic stay has been violated, he or she must show that a violation happened, that it was willful and that it caused damages. The automatic stay prohibits any act to exercise control over the bankruptcy estate's property as well as any act to take possession of estate property. In the recent case, from a Virginia bankruptcy court, a creditor of the petitioner had secured a judgment and $1,000 had been garnished from the debtor's bank account, but not yet liquidated.

Determining eligibility for Chapter 7 bankruptcy

People in Ohio who are struggling with debt might wonder whether they should file for Chapter 7 bankruptcy. Chapter 7 is for people who would not be able to repay the debts through a payment plan, which is the process under Chapter 13. Chapter 7 allows a person to discharge most types of debt, but there are certain guidelines for qualifying.

In most cases, people filing for Chapter 7 must pass the means test, meaning that their income must below the state median. A person who had a Chapter 7 bankruptcy discharged in the past eight years is not permitted to file another one. If the person filed a Chapter 13 bankruptcy, it must have been discharged more than six years ago. There must also not have been a bankruptcy dismissal in the past 180 days for reasons that include requesting a dismissal because of a creditor's request to remove the automatic stay, abusive or fraudulent use of the system, or violation of a court order.

Trustees handle many different tasks

Ohio residents who file for bankruptcy will have their assets placed in a bankruptcy estate. The estate is a separate entity that is overseen by a trustee, and his or her exact duties will vary based on the circumstances of a given case. If a person files for Chapter 7 bankruptcy, a trustee will be tasked with gathering a debtor's non-exempt property, selling it ,and distributing the proceeds to creditors.

The trustee could also be tasked with challenging claims made by creditors or challenging an attempt to have a case discharged. In a Chapter 13 case, a trustee plays a role in reviewing and approving a debtor's payment plan. This person may be allowed to object to a plan if there is reason to do so. If a repayment plan is approved, a debtor will make payments to the trustee, and he or she will distribute the proceeds received to creditors.

If your sweetheart declared bankruptcy, is the wedding off?

You may have a great job and sterling credit, but the love of your life has declared bankruptcy.

If marriage is a partnership, does that include sharing finances and merging credit scores? What does bankruptcy mean for your future and the wedding of your dreams?

Credit cards are holding millennials back

Many millennials in Ohio and throughout the country have student loan debt. However, a study from Northwest Mutual found that credit card debt may be hindering their ability to save for the future. Credit cards can come with interest rates above 20%, which is significantly higher than what a person would likely pay to finance the purchase of a home or car. That is also higher than the interest rate charged by most student loan companies.

The study found that 20% of millennials don't even know the interest rate on their credit card balances. Research has found that younger debtors use their credit cards to pay for food and travel. They typically begin using credit cards because they received applications in the mail. It isn't uncommon for millennials to have as many as four credit cards with balances on them at the same time.

Chapter 13 bankruptcy reorganizes debt and protects assets

The problem of overwhelming debts is not limited to people in Ohio with low or no income. People earning higher incomes sometimes get overextended and face difficulty keeping up with debt payments. Bankruptcy law recognizes this scenario and enables relief through a reorganization of debts under the terms of Chapter 13. During the process, a bankruptcy court imposes a three or five-year payment plan designed to fit within the debtor's income without forcing the liquidation of property.

The law does impose upper limits on the amounts of debt that a person can owe and still qualify to file for a reorganization bankruptcy. Unsecured debts cannot exceed $419,275, and secured debts cannot go above $1,257,850. As long as a person's debts do not rise above these thresholds, a bankruptcy court could approve a petition for Chapter 13 protection.

Reasons to avoid using credit cards for medical debt

Ohio residents may have noticed that the household income in the United States has risen by around 30% over the last 10 years. This is a good thing for many families because it affords them space in their budget to save money. At the same time, the costs of medical expenses have risen by 33%. Medical expenses have caused some households to take on debt, including credit card debt.

Putting medical debt on a credit card could mean paying high interest rates. Families can find themselves so far into debt that they do not have what it takes to even keep up with the interest payments. Thankfully, there are some things that people can do to keep medical debt off their credit card.

Millions of Americans are struggling with medical debt

Most of the Ohio residents who file a personal bankruptcy each year do so because of overwhelming medical debts. Figures published recently in the Journal of General Internal Medicine put the number of Americans facing financial hardship due to doctor and hospital bills at 137 million, and about half of the people polled recently by TD Ameritrade said that they would consider using funds that they have saved for their retirement years to pay medical expenses.

Americans with medical problems often find themselves burdened with debt because they do not know that the cost of treatment can vary widely. A surgeon from Johns Hopkins Hospital who has studied health care costs in the United States found that a heart procedure that would cost as much as $500,000 at many hospitals is performed for just $44,000 at some medical facilities. He says that patients should shop around before agreeing to treatment and negotiate the cost of procedures before signing any financial consent forms.

Bankruptcy rates for older Americans are soaring

The number of people filing for bankruptcy in Ohio and around the country who are 55 years of age or older has soared in recent years, and most of them are turning to debt relief because of unmanageable levels of medical debt. A study conducted by a University of Illinois law professor reveals that the number of bankruptcies filed by individuals between 55 and 64 years of age has increased by 66% since 1991, and the number of retired Americans seeking debt relief has surged by more than 200%.

This means that more than one in 10 bankruptcy filers is now 65 years of age or older. That figure stood at just 2% in 1991. While some older Americans pursue debt relief because of credit card or installment loan debt, most turn to bankruptcy after using all of their available resources to pay doctor and hospital bills. According to the University of Illinois study, 60% of the older Americans who file for bankruptcy each year do so because they have medical bills that they are unable to pay.

Debtors have rights when dealing with debt collectors

Ohio consumers who owe past due debt balances may be contacted by a debt collector. However, this doesn't mean that an individual will be required to make a payment. Furthermore, it is also possible that a person is contacted about a debt that he or she doesn't actually owe. If a debt collector does call, an individual has the opportunity to verify that the balance owed is correct and that it can still be collected.

Typically, state law imposes a statute of limitations on debt collectors, and that statute of limitations is generally four or six years. However, the clock begins the moment that a person makes a payment on that debt balance. Therefore, if a person makes a partial payment on an old debt, it may give debt collectors or other parties more time to take that person to court.

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