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Orlando Bankruptcy Law Blog

Avoid these common credit card mistakes

When you hear the phrase "credit card mistakes," you probably think of out-of-control spending. However, even people without major credit card debt often use their cards unwisely without ever realizing it. Be sure to educate yourself and avoid the following common pitfalls.

Not understanding interest charges. This is the No. 1 biggest mistake consumers can make when it comes to any type of credit. Pay close attention to interest rates when signing up for new cards and always try asking for a better interest rate. Remember that many cards will offer introductory rates that are low for the first year but then skyrocket. Also avoid being tricked by deferred interest rates; interest still begins at the day of purchase unless you pay off the full amount by the end of the deferment period. Keep in mind that cash advances, unlike normal credit card purchases, usually accrue interest even when paid in full at the end of the month.

Credit card debt is on the rise again

During the recession, consumers here in Florida and across the country put away their credit cards and were more conservative with their spending. As the economy has improved, people are once again getting into credit card debt. At last count, there were nearly 1.8 billion credit cards in use in the United States alone.

That equates to about three credit cards per household. The average amount of credit card debt carried by those households from one month to the next is approximately $7,000. The problem is that some people are unsure of just how much debt they have wrapped up in credit cards.

Millions of borrowers need student loan debt relief

Student loans are some of the easiest loans to obtain and often the hardest to repay. Many Florida residents are struggling to repay their student loans. To make matters worse, these loans are not ordinarily eligible for discharge in bankruptcy, which means that obtaining student loan debt relief can be problematic.

When Congress passed the law barring virtually every college student from discharging student loans in bankruptcy, both federally guaranteed and private student loan lenders seemed to practically give the money away knowing that it would have to be repaid somehow. This has created a massive amount of student loan debt in the United States that has reached upward of $1.2 trillion dollars. Approximately $855 billion of that money is in Federal Direct loans, and only $440 billion is considered to be in routine repayment.

The FHFA could make avoiding home foreclosure easier for some

Despite the fact that the recession and the housing market crash are considered to be over, there are still thousands of homeowners here in Florida and elsewhere whose mortgages are underwater (homeowners owe more than the home is worth). In response to this, the Federal Housing Finance Agency (FHFA) wants to make avoiding home foreclosure easier for some. Fannie Mae and Freddie Mac, which are regulated mainly by the FHFA, might be in a position to help some 33,000 homeowners who are seriously delinquent on their mortgage loans.

Certain criteria must be met in order to be up for consideration. Obviously, either Freddie Mac or Fannie Mae must guarantee the mortgage loan in question. The owner must be occupying the residents and must be at least 90 days behind on mortgage loan payments as of March 1. Furthermore, the balance on the loan cannot exceed $250,000.

Court rejects Chapter 13 bankruptcy repayment plan

Many Florida residents feel that they need to file for bankruptcy, but they want to be able to keep their assets -- particularly their homes. Therefore, they file for Chapter 13 bankruptcy, which is often more homeowner friendly than Chapter 7. The mortgage loan for the filer's primary residence often becomes part of the Chapter 13 bankruptcy repayment plan.

Mortgage lenders are granted certain rights under the U.S. Bankruptcy Code, and there are restrictions for modifying the lender's rights in the repayment plan. Another section of the code allows for the payment of priority expenses as well, such as administrative fees. These payments can often be made in advance of any other payments under the code.

It is possible to stop harassment by your creditors

Debt can sneak up on Florida residents so slowly that by the time they notice they are in trouble, it is too late. Creditors are sending letters and calling in an attempt to receive payment despite the fact that the debtors are unable to pay. Fortunately, it is possible to stop harassment by your creditors through the filing of a bankruptcy.

Missing one payment on a mortgage, car or student loan does not mean that the individual is in default. Consecutive payments must be missed before the status is changed and creditors start to make contact. Late fees, and possibly other penalties, could be assessed as well. A consumer's credit score is then impacted once negative reports are sent to the credit reporting agencies.

Do not let common misconceptions prevent a Chapter 7 bankruptcy

Florida residents who are struggling to get by and unable to pay their debts might begin their search for debt relief online. Numerous sites proclaim that certain misconceptions about Chapter 7 bankruptcy are true seemingly in an attempt to promote a debt relief product. However, the majority of the misconceptions proffered are not true.

For instance, people are often told that they will never be able to obtain credit again after filing or that they will be unable to get a mortgage or buy a car. This is not necessarily true. It might take some time, but after a discharge, the possibilities to obtain credit will only increase as time goes by.

The credit report: Your first tool to getting out of debt

It's easy to fall into the debt trap, but not very easy to crawl out. For someone living paycheck to paycheck, a major life event like a job loss or unexpected medical bill can result in a growing mound of debt. To make ends meet, many people are often forced to turn to credit cards to supplement their income, even though they may be unable to make the minimum monthly payments.

If you find yourself in this situation, it's important to take an honest look at your current financial situation to see how you can course correct.

Certain debts are not discharged in a Chapter 13 bankruptcy

There is a common misconception that if an individual files bankruptcy, all of his or her debts will be wiped clean. However, that is not necessarily true. Regardless of whether a consumer here in Florida or anywhere else in the country files a Chapter 7 or Chapter 13 bankruptcy, there are certain debts that cannot be discharged except under specific circumstances.

Certain tax obligations are not eligible for discharge, along with any debts that are incurred under false pretenses or by fraud. People also might not realize that if they fail to include a debt in the bankruptcy petition, it will not be discharged. This is just one of the reasons why it is vital to be sure that every debt, lawsuit and/or post-judgment collection action is included since the consumer would still be responsible for these missed debts after the bankruptcy closes.

Chapter 7 bankruptcy and the BAPCPA

BAPCPA is shorthand for the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which President Bush signed into law during his term as President of the United States. It made significant changes to the Chapter 7 bankruptcy process. The major change is that people across the country, including here in Florida, have to qualify for Chapter 7 before they are allowed to file.

The first hurdle that potential filers need to deal with is the means test. Every state, including Florida, has a median income assigned to it. If your income is less than that number, you qualify to file Chapter 7 and do not have to continue with the means test. If your income is higher than the median, you will then be required to provide additional information. Your disposable income must be less than $100 per month for the next five years unless you can prove that special circumstances necessitate a Chapter 7 filing instead of Chapter 13. 

Paul Urich
Orlando Office

Law Office of Paul L. Urich, P.A.
1510 East Colonial Drive
Suite 204
Orlando, FL 32803
Phone: 407-896-3077
Fax: 407-896-3041

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