Tag Archives: credit card

Mistakes to Avoid when Preparing for Bankruptcy

mistakes to avoid pic

If you are considering filing a Chapter 7 or Chapter 13 case, it is essential to understand that there are a few actions you should avoid in order to ensure that your case goes smoothly. Below are a few of the most common mistakes made by debtors that you will want to avoid:

Continuing to make charges on credit cards

In the months leading up to your bankruptcy filing, you should stop making charges on your credit cards. Any charges that are deemed to be for “luxury goods or services” on your credit card that totals in excess of $600 within the ninety (90) days prior to your case being filed, will be assumed to be non-dischargeable. A luxury good or service may be anything that is not reasonably required for the maintenance of your household. It is important to also understand that the $600 amount is not for a single charge to your credit card that exceeds $600, but the total amount of your charges incurred within the 90 day time limit. As a result, it is very important for you to cease all use of your credit cards as you prepare for your bankruptcy filing.

Repaying family members

If you have borrowed money from a relative, you may want to pay them back before you file for debt relief. However, this can cause trouble in your case. All debtors are required to disclose any payments in excess of $600 that have been paid to any creditors (including friends and family) within the six (6) months prior to the filing. The court will look back at payments made within the one (1) year prior to the filing for payments made to “insiders” such as your relatives. If you have repaid a debt to an insider, it will be deemed a “preferential payment.” In other words, you preferred one of your creditors over your other creditors, which is prohibited by bankruptcy law. If there is a preferential payment, the trustee will demand that your relative refund the money back to the trustee for the benefit of your bankruptcy estate. Failure by your loved one to refund the money could result in the trustee filing a lawsuit against him or her to recoup the funds.

Transferring assets

It is common for people to think they can protect their assets from being included in the bankruptcy filing by transferring them into another person’s name. However, the trustee will conduct an investigation for all transfers of property (which includes sales and gifts) that the debtor made within the two (2) years prior to the bankruptcy filing. Thus, it is essential that you discuss with your lawyer all assets that you want to keep in order to determine if they are protected by an exemption under the law.

If you are interested in learning more about how a bankruptcy filing will impact your debt, contact Faro Crowder, PA to schedule an appointment.

Can your Credit Card Lender Seize your assets?

credit card lender pic

According to Creditcards.com, there are numerous credit card lenders that are using their agreements as authority to seize things you buy with your credit card if you do not pay your bill in full. Typically, credit card debt is unsecured debt, which means that no assets were pledged as collateral to the lender. However, clauses that permit the lender to seize goods may alter this classification for credit card debt.

Creditcards.com reports that in excess of 200 publicly filed card contracts have provisions that grant the lender a security interest in goods purchased by the holder of the credit card. Examples of this type of card included stores that were financially backed by Capital One, including Big Lots and Costco.

If your credit card agreement contains a security interest clause, it could mean that the lender retains the right to seize purchased items even if you file a personal bankruptcy. This could be quite shocking since most consumers are not aware that their contract with their credit card lender contains this type of clause (or that they consented to it!).

Among Creditcards.com’s other discoveries were the following:

  • There has been a significant increase in popularity in credit cards that postpone interest payment for six months or more. It is important to understand, however, that these types of cards usually include contract language that charges the consumer all accumulated interest if a payment is missed.
  • An estimated 70% of the credit card agreements use variable interest rates linked to the U.S. prime rate or to Europe’s LIBOR index.
  • Credit card agreements are increasingly using mandatory arbitration clauses. This type of provision typically prevents the cardholder from filing lawsuits in court and/or creating a class action with other cardholders against the lender.

How can this type of credit card agreement impact your bankruptcy filing? If your agreement includes a security interest clause, it is possible that certain goods usually exempted from the bankruptcy process are not protected. In other words, the lender may be allowed to seize those items even though you filed for bankruptcy.

It is important to note, however, that most credit card lenders do not enforce their security interest clauses. In the majority of the cases, the items that the lender could repossess are not worth the time and expense it would take to seize them. Consider the following example:

An individual purchases a mattress for $400 and the lender offers a financing option that includes no interest or payments for 36 months. The purchaser does not make any payments over the 36 months and the accrued interest and balance now due total $1100. The purchaser still does not make a payment and the lender starts collection efforts, including telephone calls threatening to seize the mattress. The purchaser contacts an attorney who calls the lender to negotiate by offering $50 to settle the debt as the mattress is now over three years old. The lender stops calling.

To learn more about your credit card agreements or the benefits of filing a personal bankruptcy, call Faro & Crowder today!


What you need to know about Credit Card Debt in Bankruptcy

credit card in bky pic

Credit card debt is one of the most common factors that contribute to individuals filing for bankruptcy protection. If you are overwhelmed by your credit card bills, filing a Chapter 7 or Chapter 13 may be the solution. In a typical Chapter 7, the majority (if not all) of your credit card debt will be discharged or eliminated. In a typical Chapter 13, you will pay a percentage (typically a very low percentage, if anything at all) of what is owed on your unsecured debts.

It is important to understand, however, that there are exceptions to the general rule. Pursuant to 11 U.S.C. §523(a), there are a few exceptions to the rule of dischargeability. The two most common types of credit card debt to be excluded from discharge, include:

  • Credit obtained by lying. When a debtor puts false information on his or her credit application in order to qualify for the credit card, the lender can seek to have all of the purchases made on the credit card to be non-dischargeable. If the court agrees with your lender, you will remain liable to pay the debt even after your bankruptcy case has concluded. The most common occurrences of lying to obtain credit include significantly over-estimating income or under-estimating debt.
  • Fraudulent purchases. Many people incorrectly believe that they can make purchases on their credit card in the days leading up to their bankruptcy filing and discharge the debt. Any charges that are incurred by fraud or false representations can be held to be non-dischargeable. If the court holds that you used your credit card to buy items with no intent to pay for them, you will remain liable to pay the debt. Additionally, if a debtor buys frivolous items, maxes out the limit on the credit card, or even drastically increases credit card use just prior to filing bankruptcy, the creditor can challenge the dischargeability of the debt.

If you have questions about filing for bankruptcy protection, we have the answers. Call us today to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals and businesses across the State of Florida.


Should I Consolidate my Debt With Credit Card Balance Transfers?

Credit Card Balance Transfer pic

Many individuals who are struggling financially consider consolidating their debt by using a credit card balance transfer. This process allows the consumer to move one or more credit card balances to another card that offers a lower interest rate. It is important to investigate whether this type of balance transfer is actually a good deal.

Most credit card companies charge a costly fee to perform the transfer. This fee may be a minimum flat fee or a percentage of the total amount that is being transferred, or whichever is the greater of these. You should determine whether paying these fees is worth it compared to the amount you will save by obtaining the lower interest rate.

One problem with credit card balances is that the best time to do the transfer is when your credit is still in good shape. You must have a good credit score to qualify for a low interest rate (or even 0%), but most people don’t consider credit card balances until they are already behind on their bills. As a result, it can be difficult to qualify for an advantageous credit card balance transfer.

Another significant consideration in balance transfers is that you must have a credit limit large enough to accommodate your debt. If your credit limit is insufficient, you may only be able to transfer a portion of your debt. While this can still be helpful because you can transfer the debt with the highest interest rate, which can save you money.

Finally, in order for you to truly benefit from a credit card balance transfer, you must be committed to not incurring new debt. This can be difficult because once you transfer your debt, your credit limits will be re-established on those cards. If you start making charges on your cards and digging a deeper hole, it is unlikely that you will pay off the full amount transferred before the period of the low interest rate expires. You can end up in worse shape than before you made the credit card balance transfer.

Before you try to handle your debt by using a credit card balance transfer, call us to learn more about other available options. Call us today to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals and businesses across the State of Florida.


Defending a Credit Card Lawsuit

Credit Card Lawsuit pic

If you are drowning in credit card debt but you want to avoid filing a Chapter 7 or Chapter 13 case, we can help you discover the wide variety of defenses that may be available to you. It is imperative that you contact us as soon as possible because there is a strict deadline for submitting these defenses or they will be deemed to have been waived. Below are a few examples of defenses that may be available to you in a debt collection lawsuit:

  • Improper service. The law requires a creditor to follow strict requirements when serving you with a lawsuit. If you can establish that service of process to you was invalid, it is a valid defense.
  • Statute of limitations. A credit card company has a deadline for filing the lawsuit to collect the debt from you. If the statute of limitations for collecting the debt has expired, the lawsuit can be dismissed.
  • Standing. It is common for credit card debt to be sold to debt collectors or debt buyers, so it is also common for the supporting loan documentation to not get transferred properly. In other words, if the creditor cannot prove that it owes the debt, the lawsuit can be dismissed.
  • Discharge. If you filed a prior Chapter 7 of Chapter 13 bankruptcy case and included the collector’s debt in your filing and it was discharged by the court, the collection lawsuit is prohibited.
  • Identity fraud. If your identity was stolen or the debt does not belong to you, it can be a valid defense.
  • Accounting error. If you can prove that the plaintiff has sued you for an incorrect amount, you have a valid defense. This may include the creditor failing to properly apply your payments or charging fees you do not owe.
  • Abusive tactics. If a debt collector that has illegally harassed you or been abusive in its attempts to collect the debt from you, you can file a counterclaim seeking to recover monetary damages.

If you are interested in learning more about defending a collection lawsuit, contact one of our seasoned bankruptcy attorneys to schedule your appointment.


Contact Us For A Free Consultation





captcha


css.php