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Redwood City California Bankruptcy Law Blog

How to determine if a debt can be discharged

Consumers in California and throughout the country may be entitled to have some of their unsecured debts wiped out in bankruptcy. As a general rule, bankruptcy is available to honest debtors who are looking for a fresh start. However, there are many factors that a bankruptcy court may need to consider if debts were the result of fraud or similar activities. Specifically, debts may be not be discharged if they were accrued because of fraudulent conduct while acting as a fiduciary.

Furthermore, a judgment related to the willful injury to another person or another person's property generally cannot be discharged. In such a scenario, it would be necessary to show that a defendant intentionally took action that would have caused an injury. If punitive damages are awarded in a case, they could be discharged in a bankruptcy depending on the circumstances in that matter.

Debt consolidation or Chapter 13 bankruptcy

Many California consumers are struggling with ever-escalating amounts of debt. At the same time, many of them are reluctant to consider personal bankruptcy as an option. People can be afraid that bankruptcy may lead to tremendous financial damage that is difficult to recover from. As a result, they may look toward alternatives like debt consolidation to lower their monthly payments. However, these options can also take a toll on a person's credit report without necessarily providing the level of relief that people can obtain through a Chapter 13 bankruptcy.

Chapter 13 bankruptcy enables people to pay their way out of debt without losing their home and other assets. While Chapter 7 bankruptcy may provide more complete debt relief, people have to relinquish their non-exempt assets which are then sold to repay creditors. In addition, some people may not be eligible to file for Chapter 7 due to its income limitations. Instead, people work to pay off their debts during a period of three or five years.

Credit card statistics show growth in unrepayable debt

Many people in California are struggling under a significant debt burden that they may find themselves unable to repay. This is reflected in statistics in the credit-card industry that show that the rate of bad debt is climbing for people across the country. The rate of charge-offs, loans that the credit card companies have declared that they never expect to collect, rose to its highest level in nearly seven years in the first quarter of 2019. The figure rose to 3.82 percent, marking the largest share of unrepayable loans since the second quarter of 2012. This came together with statistics showing that loans 30 days past due also increased at the seven largest credit card companies.

Credit card executives said that these problems could increase as more customers with serious financial problems during the crisis of 2008 have their old issues wiped from their credit reports. Others pointed to ongoing issues in the economy, including increased job precarity. The problems were seen across card issuers; Capital One said that its charge-off rate rose to 5.04 percent from 4.64 percent, while Discover said that its rate increased to 3.5 percent from 3.23 percent one quarter earlier. Some credit card companies said that they may take a more conservative approach to lending as a result of the figures.

Rebuilding positive credit after bankruptcy

Many people in California find bankruptcy a potentially appealing option, but they are worried about the long-term effects on their credit scores. After all, Chapter 7 bankruptcies remain on a person's credit report for 10 years while Chapter 13 bankruptcies, with payment plans and debt restructuring, persist for 7 years. Indeed, bankruptcy can damage a person's credit report significantly. However, at the same time, it is important to note that most people who are considering bankruptcy are already suffering from bad credit that makes it difficult to obtain credit cards, mortgages or loans.

Most people turn to bankruptcy only after they have been struggling for some time with overwhelming debt. They may have unpaid bills, collection calls or even judgments over their medical bills, credit card debt or outstanding loans. Therefore, some people who file for bankruptcy may see an improvement in their credit scores even immediately after the filing due to the elimination of a substantial amount of negative debt. While bankruptcy items remain on a credit report for some time, bad credit items can also persist for seven years. Therefore, bankruptcy can offer a mechanism for people to seek debt relief and change their relationship with finances.

Are you losing a portion of your wages to garnishment?

Owing a significant amount of debt can lead to stress and complications in various areas of your life. One common result of falling behind on your payments is that creditors and debt collectors will work diligently to try to collect on these past-due balances. One way they often do this is through wage garnishment.

Wage garnishment happens when a creditor gets a court order to have your California employer withhold a portion of your wages. This amount will go toward the repayment of your debts. Learning that you are subject to wage garnishment can be devastating, especially if you are already facing a difficult financial situation. You may want to learn more about what this process entails, what to expect and how you may be able to make it stop.

Getting business loans after a bankruptcy

Getting a business loan in California can be complicated for those who have filed for bankruptcy in the past. This is generally true whether a person filed for a liquidation or reorganization bankruptcy. However, it is usually easier to get financing the farther removed from the event a person is when asking for a loan. It is important to know that a business owner's personal credit score may not come into play.

If a company has an established credit history, a lender may be willing to use that as a basis to approve a loan. Therefore, it may be a good idea to work on building the company's financial track record prior to submitting a loan application. It is also possible to get money to run a business without having to rely on a bank loan.

Student loan bankruptcy rule may soon change

Levels of student debt are higher than they have ever been for students and ex-students in California. However, discharging this debt in bankruptcy is nearly impossible. To help alleviate this problem, the American Bankruptcy Institute's Commission on Consumer Bankruptcy is proposing sweeping changes to bankruptcy legislation that would make it easier for people to file. Bankruptcy law hasn't changed since 2005 when it was made much more strict for borrowers.

The commission's proposal is designed to give reformers ideas on how to change the bankruptcy code should they have the desire to do so. One of the most significant proposed changes would be to make student loan debt dischargeable seven years after they first become payable. Even if Congress doesn't follow the proposal, the suggestions made by the commission could influence the way bankruptcy judges make their decisions.

Common lines debt collectors use during phone calls

Debt collectors in California and other states may try to convince debtors that it is in their best interest to pay off a debt. In most cases, debt collectors are trained to say whatever is most likely to solicit the response that they want. For instance, they may say that paying a debt balance off could result in an increased credit score. While this could be true in some cases, negative information may still remain on a credit report.

Debt collectors may also encourage a debtor to let them talk to that person's friends or family members. This may be done under the guise that they could lend money or otherwise help resolve the situation. However, the debt collector's true intent is to get as much information about the debtor as possible. In some cases, a debt collector will threaten a person with legal action if the debt isn't paid right away.

How out-of-network charges surprise patients

Some people in California may be among the 1 in 7 nationwide who are surprised by medical bills from out-of-network providers despite visiting an in-network hospital. The incidence varies from state to state, with admissions that include at least one out-of-network claim below 2 percent in Michigan but higher than 26 percent in Florida.

At issue is the medical billing system and the lack of transparency for consumers. Patients have no way of knowing whether an independent lab or particular physician at an in-network hospital is also in-network, and even asking does not always provide reliable answers. The incidence is particularly high with independent labs and anesthesiologists. Among the other specialties with the highest rates of out-of-network claims within an in-network system are primary care, emergency medicine and radiology. Insurance policies and their requirements are growing increasingly complex, but it is not just patients who are paying the price. The cost of adjudicating claims annually is also high for hospitals and insurers.

Protect your rights regarding personal debt collections

You might currently owe more than one lender money. It is not uncommon, nowadays, for California residents to have multiple loans out at once. Perhaps you have a mortgage, a car loan and credit card debt. If you run into financial trouble, it can be quite challenging to meet your monthly payments. Many issues, such as reduction of income, medical bills or some other family crisis, might throw your finances completely out of whack.

If this describes your current state of affairs, know that you are definitely not alone in your struggle. The good news is that there are often several options for resolving serious financial problems. More good news is that most financial crises are temporary. What can make this type of situation all the more stressful is having creditors hound you with phone calls or employ other practices to try to collect a debt.