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Orlando Bankruptcy Law Blog

Court approval is required to modify a debt repayment plan

Many Florida residents file for Chapter 13 bankruptcy in order to reorganize their debts and gain a fresh start financially. As part of the process, they are required to prepare a debt repayment plan for court approval. Once that plan is approved, modifying or changing it also requires court approval, which will only be given if there is a substantial or otherwise unanticipated change in circumstances that warrants it.

Recently, the Bankruptcy Court denied a couple's motion to modify their plan. They wanted to change their plan in order to surrender an older model vehicle to the secured creditor who loaned them the money to purchase it. The vehicle was purchased just months before the filing of their Chapter 13 petition.

Financial recovery after a Chapter 7 or Chapter 13 bankruptcy

Florida residents often wonder what the impact of a bankruptcy will be on their credit. A Chapter 7 or Chapter 13 bankruptcy will make an impact on your credit, but not all of the results are bad. There are things that you can do in order to hasten the rebuilding of your credit.

Once the bankruptcy process is complete, you will no longer be responsible for certain debts. This means that your debt-to-income ratio (which is the amount of your debt in relation to the amount of your income as the name implies) will be lower. Creditors will consider this ratio before extending credit to you.

What property is not exempt in a Chapter 7 bankruptcy?

Part of the reason that many Florida residents hesitate to file for bankruptcy is that they believe they will not be able to keep any of their property, including their home. However, there is quite a bit of property that those filing for Chapter 7 bankruptcy are able to retain. What most people need to know is what types of property are not exempt In a bankruptcy liquidation proceeding.

Nearly every filer is allowed to keep a vehicle so long as it does not exceed a certain value. However, a second vehicle does not fall under any exemption. Likewise, a Florida resident might be able to keep the family home. However, a vacation home or second home of any kind could be sold to pay creditors.

Mother faces Chapter 7 bankruptcy due to high medical bills

Most Florida parents would do whatever is necessary to ensure the health and well-being of their children. One mother even underwent surgery for her son after medical mistakes led to his liver failure. Now, she is facing Chapter 7 bankruptcy due to millions of dollars in medical bills.

When the boy was taken to the doctor for what was believed to be simple constipation, it was discovered that he had a tumor. The surgical procedure to remove the tumor led to excessive bleeding, which caused the failure of his liver. As the hospital attempted to correct the problem, the boy was forced to undergo three more procedures, but the problem only got worse.

Do debt buyers cause a rise in Chapter 7 bankruptcy filings?

Far too many Florida residents have been sued over unpaid debts that companies say they owe. Since the 1990s, such lawsuits seem to have increased as "debt buyers" have used the legal system in an attempt to collect those debts -- in some cases, from people to whom the debts do not even belong. It is only logical to wonder whether these debt buyers are contributing to the number of Chapter 7 bankruptcy filings here and across the country.

The companies buy old debts from other companies and pursue them through the legal system. Data gathered by one source indicates that debt collectors file nearly half of all civil claims filed across the country. For example, a company called Encore Capital Group collected approximately $1.2 billion -- yes billion -- in consumer debt. Records indicate that around half of that amount was collected using the court system.

Bankruptcy can help when you are behind on house payments

Many homeowners in Florida are still having trouble with paying their mortgages after the housing market collapsed due to the recession. Getting behind on house payments can cause a myriad of issues, such as creditor harassment and the initiation of foreclosure proceedings. If you want to keep your home, filing for bankruptcy could help.

It should be noted that it is necessary to be caught up on mortgage payments in order to keep your home, regardless of whether you file Chapter 7 or Chapter 13. If you believe that you will be able to get caught up quickly, then it might be beneficial to file for Chapter 7, if you qualify, since it could wipe out unsecured debts, such as credit card balances. This could free up the income you need to make your payments and keep your house.

Default interest rate must be included in debt repayment plan

Many mortgage promissory notes across the country and here in Florida account for a higher rate of interest if the borrower defaults on the loan. If a homeowner files for Chapter 13 bankruptcy, any debt repayment plan will most likely include mortgage payments at the default rate of interest since it is impermissible to modify a lender's rights without its consent. One couple learned this the hard way after the U.S. Court of Appeals for the 4th Circuit agreed with the rulings of the district court and the bankruptcy court on the matter.

The couple borrowed approximately $255,000 to purchase a home. Ultimately, they defaulted on the mortgage loan when they were unable to make payments. The lender then instituted the default rate of interest, set at 7 percent, and initiated foreclosure proceedings. The homeowners then filed for Chapter 13 bankruptcy protection, which was their right.

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.

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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