Category Archives: Credit Card Debt

Lewisville Texas Bankruptcy Attorney: LEGISLATION PROTECTS COLLEGE STUDENTS FROM PREDATORY LENDING

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Lewisville Texas Bankruptcy Attorney: LEGISLATION PROTECTS COLLEGE STUDENTS FROM PREDATORY LENDING

When I went to college, students didn’t just get degree.  They also accumulated huge amounts of credit card debt.  Anyone who has attended college during the last ten years can tell you that credit card applications were offered to them everywhere on campus.  Credit card companies had booths at school fairs and advertisements on classified boards in common rooms.  I even used to find flyers attached to the walls in classrooms.  This type of marketing makes a lot of sense.  College students are usually poor and in need of money, and they are financially inexperienced and unsophisticated.  And when they can’t pay off their credit card debt, one of two things happens.  They either go to their parents for money or they default on their debt.  Defaulting on a credit card can be very expensive.  Upon default, credit card companies raise interest rates, sometimes as high as 30% and charge fees as well.  Small balances can become very large very quickly, so that by the time a student has finished college and begun working they are drowning in debt.

 

Fortunately, recent legislation has been implemented to prevent these types of predatory lending practices.  The CARD Act prevents credit card companies from being allowed to consider the student’s parents income when reviewing applications for credit, unless the parent cosigns the application.  In addition, credit card companies cannot go on campus to solicit college students.  In fact, this legislation states that credit card companies must remain at least 1,000 feet off campus.  But for many recent graduates, this legislation is too late.  Large credit card balances leave them with few options for relief from their debt.

Texas Bankruptcy Attorney:STRATEGIES FOR COPING WITH CREDIT CARD DEBT

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Dallas Bankruptcy Attorney:

STRATEGIES FOR COPING WITH CREDIT CARD DEBT

Recently I read an excellent article by Laura Coffey on MSN.com discussing strategies for reducing credit card debt.  As a bankruptcy attorney, I meet with clients everyday that are struggling with repaying high interest credit cards, and repaying these types of loans can be an uphill battle.  The average interest rate on credit cards is 14.9 percent, but interest rates of up to 28 percent are not uncommon.  At 28 percent interest a credit card balance is doubling every three years.  For many debtors, this makes repaying their debt nearly impossible.

 

Ms. Coffey suggests the following strategies for reducing personal debt:

 

1. Know how much you owe. Collect each of your bills with outstanding debts including all credit cards, mortgage, student loans, auto loans, personal loans, and bank loans. Create a list of all the creditors with monthly payment amount, balance, interest rate, and credit limit for each. Verify the payment due dates and the status of the account.

 

2. Prioritize which bills to pay first. If you can’t pay off all your monthly bills, first pay the bills that are a necessity for health, shelter, basic groceries and basic transportation. Then pay the secured loans such as your car loan. Payments on unsecured loans, such as most credit cards, should come last in these critical situations.

 

3. Obtain a free copy of your credit report and review it. It may contain an error that is creating a lower credit score that is leading to higher interest rates on your loans. If correcting the error results in a higher credit score, contact your creditors to make sure they know about your improved score.

 

4. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you have to pay off your bills. If you are in danger of missing a payment, contact your creditors as soon as you realize you have a problem. They may be willing to work out a payment plan, lower your rate, or lower your monthly payment. Explain that you are in debt, the steps you are taking to repay it, and what you can pay today. If you request a lower interest rate and get turned down, politely ask to speak to the supervisor and ask again. Document all conversations, including whom you spoke with, and the date, time, and the results.

 

5. Pay more than your minimum. Your minimum payment is usually only 2 percent to 5 percent of your balance. At this rate, it will take many years to pay off your debt. In fact, your credit card bill now shows exactly how long it will take. You may be surprised about how much you will pay in interest payments by paying just the minimum payment each month.

 

6. If you have multiple credit cards with outstanding balances, focus on paying off the card with the highest interest rate first. Continue to pay the minimum on your other cards until the card with the highest rate is paid off, and then focus your effort on the card with the next highest interest rate. Keep your oldest credit card accounts open and occasionally use them to buy a magazine or a movie ticket — just pay it off each month. This may help improve your credit score.

 

7. Check into transferring your balance to a card with a lower interest rate. If your rate is above 15 percent, it could pay to transfer the balance for that card to one that offers 0 percent APR for at least 12 months for balance transfers. To take full advantage of this 0 percent interest, pay as much as you can above the monthly minimum. Only use this card for the balance transfer, not additional purchases. Pay attention to the balance transfer fee. At the beginning of 2009, the industry standard for a balance transfer fee was 3 percent; now several issuers have increased that fee to 4 percent.

 

Some people have so much credit card debt that they cannot repay their debt, even following these rules.  For those people, bankruptcy may be a good tool for obtaining relief from their debt.  Not all people are eligible to file bankruptcy, so if you are struggling with repaying your debt you should speak with an experienced attorney.  It’s also a good idea not to wait too long to get advice on bankruptcy.  There are limits on how much debt a person filing Chapter 13 bankruptcy can have at the time they file.  If you wait to file bankruptcy and your debt continues to grow due to interest and fees, you may find that you are no longer eligible for Chapter 7 or Chapter 13 bankruptcy.

(Source:  msn.com)

Dallas Bankruptcy: HOW LONG WILL IT STAY ON MY CREDIT REPORT?

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Dallas Bankruptcy: How long will it stay on my credit report? It depends on what Chapter you file under.  Chapter 13 bankruptcy cases will stay on a credit report for seven years from the date the case is filed.  Most Chapter 13 bankruptcy cases last five years, so after the case is completed the bankruptcy will be on your credit report for two more years.  Chapter 7 bankruptcy cases remain on a credit report for ten years from the date the case is filed.

It’s important to understand that having a bankruptcy listed on a credit report doesn’t necessarily guarantee a bad credit score.  Credit reports are made up of many positive and negative notations.  A bankruptcy is just one notation.  Most of my clients tell me that their credit score is higher a year after filing bankruptcy than it was before filing because they have discharged their debts and are better able to pay their bills on time.

BANKRUPTCY: CREDIT CARD TRANSACTIONS FRAUD? IT’S A MATTER OF TIMING

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Some types of debts cannot be discharged in bankruptcy.  These include income tax, child support and student loans.  Then there are other types of debts that should be dischargeable in bankruptcy, but become non-dischargeable because of how the debt was incurred.  For example, debtors that obtain money, property, or services through fraud remain liable for these debts after they receive their discharge.

 

To have a debt determined to be nondischargeable due to fraud, a creditor must show:

 

  1. The debtor made false representations to the creditor;
  2. The debtor knew the representations were false;
  3. The debtor made the representations with the intent of deceiving the creditor;
  4. The creditor relied on the representations; and
  5. The creditor sustained a loss as a result of the debtor’s misrepresentations.

 

It appears from the list above that fraud should be difficult to prove.  It’s actually surprisingly simple in cases involving credit card debt.  Debtor’s use of a credit card is often treated as an implied representation to the credit card company that the cardholder intends to pay the charges incurred.  AT&T Universal Card Servs v. Mercer 246 F.3d 391, 404 (5th Cir. 2001).  Since the debtor’s use of the credit card is a representation to the company that the cardholder intends to pay the charges, the biggest hurdle for the creditor to proving fraud is establishing that the debtor had no intention of repaying the debt.  Courts will consider many factors when determining if a debtor had no intention of repaying the debt, including the time between use of the card and the bankruptcy filing, debtor’s financial condition when the card was used, whether the card was used for luxuries or necessities, and whether the debtor consulted with an attorney about bankruptcy before incurring the debt.

 

As a general rule, debtors should not use a credit card during the six month period prior to filing bankruptcy.  Additionally,  debtors should not use a credit card once they make a decision to file bankruptcy or realize they will not be able to repay the debt.  Debtors who do not follow this advice risk being sued in bankruptcy court and having their debts declared nondischargeable.

CAN I KEEP A CREDIT CARD WHILE IN CHAPTER 13 BANKRUPTCY?

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I probably answer over a hundred questions for my clients each week.  Unfortunately, my answers are often long, complicated or the oh-so-helpful “it depends.”  Luckily, once in a while, I get a question like the one in the title of this article, and I get to give a simple, easy to understand answer.  “No.”  I have answered the question and it seems like I should be able to stop now, but I am an attorney, and therefore sometimes long-winded, so I feel compelled to elaborate.

 

The first reason you cannot keep a credit card is because you are not allowed to show preference to specific unsecured creditors while in bankruptcy.  When you file Chapter 13 bankruptcy, you must list all of your debts.  Debts are divided into three general categories in your schedules.  These include secured, priority and unsecured debts.  Credit card debt falls into the unsecured category.  In bankruptcy, you cannot make payments to an individual unsecured creditor in preference to other unsecured creditors.  They must receive equal treatment.  If you make payments to an individual credit card, excluding disbursements from the Trustee, then you are showing preference to that creditor.

 

The second reason you cannot keep a credit card while in Chapter 13 bankruptcy is because The Bankruptcy Code specifically states that a debtor in bankruptcy cannot incur new debt without permission from the Court.  Depending on your situation, bankruptcy courts will allow you to incur new debt to modify mortgage loans and purchase or lease new vehicles, but I have yet to see an order granting a motion to allow a debtor to keep a credit card.