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Chattanooga Bankruptcy Law Blog

For millennials, credit card debt is a growing problem

Tennesseans can run into financial challenges for a variety of reasons. These financial difficulties impact people across the spectrum, young and old. For some demographics, however, there are certain aspects of debt that are problematic for their specific group. Understanding the problem is one way to achieve a solution. To get to a better financial situation, it is wise to know the alternatives available and to take the necessary steps to solve the issue. Filing for bankruptcy might not be the first thought that comes to mind, but for millennials who are dealing with overwhelming credit card debt, it is an option to consider.

According to recent statistics, whereas millennials were once conscious of avoiding significant credit card debt, they are now facing serious debt issues because of it. While from 2008 to 2012 41% of people in their 20s had credit cards, that has risen to 52%. With that has come substantial debt, and it is being mismanaged. About 8% of these individuals were classified as "seriously delinquent" for the first quarter of 2019. This is the worst of any age group. This credit card debt burden is on top of student loans, which have reached crisis proportions at $370 billion for this age group.

Disabled veterans may see student loan debt relief under new bill

Many servicemen and servicewomen from Tennessee and across the nation give more than just their courage to our country -- they give their health. These veterans may find that their disabilities have changed their lives forever, and in some ways have made their life more challenging. For example, if a person is so disabled that they cannot work, they may not be able to pay back their debts, including federal student loans. In fact, almost 34,000 veterans with a disability are behind on their student loan payments.

However, these veterans may find student loan debt relief under a new bill that has bipartisan support. This proposal -- known as the, "Federally Requiring Earned Education-Debt Discharges for Veterans Act," -- would dismiss qualifying veterans' federal student loan debts, even if the veteran had not applied for debt forgiveness programs for which veterans with a 100% disability may qualify.

There are advantages to filing for Chapter 13 bankruptcy

Bankruptcy has a stigma associated with it, but it need not be that way. Rather than being a process that causes a person to lose all their possessions and become destitute, bankruptcy offers a means for debtors to repay many of their debts, allowing them to move forward with a clean financial slate.

When it comes to personal bankruptcy, debtors generally have two choices: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy is the type many people in Tennessee may be more familiar with. In a Chapter 7 bankruptcy, some (but not all) of a person's assets are liquidated and used to pay the person's debts. After that, many (but not all) of the person's remaining debts are discharged. The Chapter 7 bankruptcy process is rather quick, taking around six months to complete.

Can you discharge student loan debt through personal bankruptcy?

The student loan debt crisis has hit many in Tennessee hard. Student loan payments have risen to such degrees that people are being forced to make uncomfortable decisions, such as having to decide which bills to pay each month and which to put off. Sometimes even taking care of the necessities such as putting food on the table, paying rent or a mortgage, or paying for electricity or water become difficult if not impossible. When this happens, people may want to consider filing for personal bankruptcy.

Some may have heard that student loan debt is not dischargeable through personal bankruptcy. However, that is not entirely true, although it is very difficult. If a person qualifies for Chapter 7 bankruptcy, the court will use what is called the "Brunner Test" to determine if a debtor's student loans should be discharged. Under this test, the debtor must be able to show that they would be unable to keep up a basic standard of living if they were forced to pay back their student loans. The debtor also must show that such hardships would last for the entire repayment period and that their financial situation will likely not change during that period. Finally, the debtor must show that they have made a reasonable attempt to pay back their student loans.

Can I keep my car if I file for Chapter 7 bankruptcy?

One of the common misconceptions about filing for bankruptcy is that you will lose all your possessions. This can be a scary thought. One asset that most people in Tennessee rely upon daily is their car. Without their car they may be unable to get their kids to school, get themselves to work, get groceries, or make it to doctor's appointments. For some people, the loss of their car could cost them their job and put their life at a standstill.

Fortunately, filing for Chapter 7 bankruptcy does not mean you'll become impoverished. There are ways to keep your car, even if you file for personal bankruptcy. If you own your car outright, it may be possible to claim it as an exemption. Those who claim their vehicle as an exemption need to ensure that the entire value of the vehicle is covered by the exemption, or the bankruptcy trustee may still retain the ability to sell the vehicle.

Credit card debt becoming a problem for college students

A whole new group of high school seniors have recently graduated out of their academic institutions and have prepared themselves for the future beyond their kindergarten through 12th grade educations. While some may begin their careers or training programs to enter the workforce, others may choose to continue their educations at two and four-year colleges. Those who do may have to take out student loans to pay for the education opportunities they seek to acquire.

Across the nation and right here in Tennessee, young people are swimming in student loans but they are also starting to accumulate another kind of damaging debt: credit card debt. Over one out of every three college students now has credit card debt in excess of $1,000 that they do not have the easy ability to pay off.

Can credit card companies arbitrarily change interest rates?

It may seem as though the interest rates that Tennessee residents pay on their credit cards are all different and always changing. While there is some variation and volatility in these matters, credit card companies are not allowed to make unannounced or surprise modifications to the rates they charge. This post will address this topic in more depth but, as with all debt and bankruptcy matters, readers are reminded to always seek their own legal advice so that they can best manage their own legal needs.

Under the CARD Act, credit card companies must provide their borrowers with notice of interest rate changes. Those notices must be provided at least 45 days in advance of the implementation of those changes, and may also apply to changes in how the credit card company will assess and collect certain fees. The notice period is intended to give individuals time to decide what they want to do.

What to know about the automatic stay

Bankruptcy can be an important legal step toward a Tennessee resident gaining control over their debts and finances. While not every debtor will require the stringent processes of bankruptcy to get themselves back on solid financial footing, others may need it and its eventual discharge to secure stronger ground on which to rebuild their lives. However, even before discharge happens in a personal bankruptcy may a person begin to experience the benefits of having filed for the process.

One reason that individuals choose to file for bankruptcy is so that they may experience the automatic stay. The automatic stay is a part of most personal bankruptcies and it effectively stops any actions by creditors against debtors who file. For example, once a person successfully files for bankruptcy their creditors can no longer garnish their wages for the repayment of their debts.

What can be done about spousal support debt?

Although a divorce can end the legal relationship between two Tennessee residents, they may continue to be connected through a variety of legal and financial ties. For example, if they share children then they may be required to work together to successfully execute their child custody plan. If one person is financially disadvantaged after the divorce, the other may be required to provide them with spousal support.

Spousal support may be created by agreement or court order and generally becomes part of a final divorce decree. It is therefore enforceable through the courts when it is not paid and those who fall behind on their spousal support payments may be subject to penalties for their delinquencies. Spousal support debt may be part of the financial problem that forces a person to look into their bankruptcy and debt relief options.

Proposed rules would expand debt collection efforts

Many people who are struggling with debt know the awful feeling of being contacted by debt collection agencies. The letters that come in the mail can be intimidating and the phone calls can be even worse.

Now the Trump administration wants to give debt collectors more ways and more opportunities to contact debtors. Under new rules proposed by the federal Consumer Financial Protection Bureau, debt collection agents would be barred from calling debtors more than seven times per week, but would be able to send unlimited numbers of text messages and emails. They would also be able to contact debtors through social media and private messages.

Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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