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Long Island Bankruptcy Law Blog

Credit card charge-offs increase

Consumers in New York may be well aware that most people consider the current economy to be strong and healthy. That, however, does not mean that there are not plenty of individuals out there who may be unable to pay their bills and who are struggling with serious credit card debt. There can be any number of reasons that find a consumer in this position and it can happen regardless of the general economic tide.

A report issued by Bloomberg recently indicated that keeping up with credit card payments appears to be a challenge for many American consumers as more banks have issued charge-offs for debt. A charge-off occurs when a lender decides to cease efforts in trying to collect a debt and instead essentially writes it off.

Changing spending habits to decrease debt

Unfortunately, debt is something that affects many New Yorkers. Whether it comes from surprise medical bills or simply from someone getting in over their head with their style of living, a person can end up owing more money than they feel they can pay off. 

Bankruptcy exists as a way to help ease the burden of debt. In bankruptcy basics, FindLaw explains that there are many different types of bankruptcy that can be filed which deliver debt relief to the filer. For example, Chapter 13 allows for a repayment plan to pay back debts while keeping belongings, while Chapter 7 allows liquidation to repay debts. 

Know when to consider Chapter 7 bankruptcy

When you are having financial problems in New York, you may sometimes think that putting more money toward your debt is the only solution. Sometimes, though, this solution may not fix your current situation and you may need a more serious plan of action. At Macco and Stern, LLP, we understand that some people are wary of bankruptcy. That's why we are committed to making sure you have all the information you need to determine if Chapter 7 is a good option for you.

You may think that filing for bankruptcy is one of the worst things you can do for your finances. Nerd Wallet says that depending on your financial situation, bankruptcy may not destroy your future financial security. You might worry that once you file for Chapter 7, you will be unable to repair your credit history. However, it is important to remember that by the time you decide bankruptcy is a good option, your credit score might already be in terrible shape. One professor of economics says that most people can quickly rebuild their credit after bankruptcy, especially if the bankruptcy removes all of their debt.

Bankruptcy attorneys: More than someone to help you file

Bankruptcy attorneys are more than a go-between for you and the court system. They're highly educated in bankruptcy and negotiation, which can help you negotiate away debts and potentially avoid bankruptcy, in some cases. If you do choose to enter into bankruptcy, they can help you choose the right kind of bankruptcy and give you options on how to move forward.

There are a few things your attorney will help you with right away. The first is going through your documents. The second is educating you on your options. The third is filing for bankruptcy or taking steps to resolve your debts in other ways.

Buying time with Chapter 13 bankruptcy

It is not only those who have little in the first place who can experience financial difficulties and struggle to pay off debt. At Macco & Stern, we have seen people in dire straits despite earning a substantial income on a regular basis. Your financial problems may have resulted from circumstances beyond your control, such as an economic downturn. Chapter 13 bankruptcy is for those who have the ability to earn enough to pay off their debts but need extra time to do so. 

Chapter 13 reorganizes your debt so that you can arrange to pay it back over a period of three to five years, making smaller payments than you would otherwise. In effect, it buys you more time to pay off high-priority debts such as taxes, back child support and mortgage arrears. Without the extra time that you gain by filing for bankruptcy, falling behind on these payments could result in severe penalties, such as garnishment of your wages or foreclosure on your home. 

Filing Chapter 11 as an individual

In most cases, individuals filing for bankruptcy in New York have the choice of filing either Chapter 7 or Chapter 13. At Macco & Stern, we know that both Chapter 13 and Chapter 7 have strict eligibility requirements. As an individual with a high net worth, you may have accumulated too much debt, in the form of car loans and mortgages, to qualify for either. If that is the case, you may have the option of filing under Chapter 11. 

Even though, according to FindLaw, Chapter 11 pertains primarily to businesses, on rare occasions when your excessive debt falls well outside the limits of Chapter 7 and Chapter 13 allowances, you may file Chapter 11 as an individual. The U.S. Supreme Court ruled that individuals have the ability to file Chapter 11 in 1991. However, it still happens only on an extremely rare basis. While approximately one-third of consumer bankruptcies file Chapter 13, and over one-half file Chapter 7, the percentage of individuals who file Chapter 11 is 0.1 percent. 

What are today’s most common types of debt?

If you can spend money, you can get into debt. However, not all forms of debt are the same. Some are the result of an unforeseeable emergency, while others stem from unwise spending and charging habits. Some debts can be discharged through personal bankruptcy, and other types are non-dischargeable. You may want to consider filing bankruptcy for certain types of crippling debt, while it may be smarter to restructure and repay other debts. It can help you and other New York residents to make informed decisions before making a decision regarding your debt.

Lifehacker has outlined some of the most common debt types you can end up owing, as well as tips for dealing with each:

  • Credit card debt – Financial professionals recommend not adding to your credit card debt as you tackle what you have. You can try to negotiate a lower interest rate or pay more than the monthly minimum to pay down this debt.
  • Student loans – Federal student loans can’t be discharged through bankruptcy in most cases. You may want to look into deferring your loan payments or working out an income-based repayment plan with your loan counselor.
  • Medical bills – Always check your medical bill for mistakes, as an incorrect medical charge can be costly. You can ask about negotiating your bill or discussing subsidizing and repayment plans with a medical bill advocate.

What should I do when my credit card debt is out of control?

It is so easy to charge purchases on your credit card. Sometimes, it is too easy. You see something you really need but do not have the money, so you charge it. You run to one of the many New York shops and see an outfit that you cannot live without but payday is not until next week, so you figure you can just charge it. This can quickly snowball from an occasional charge to reliance on using your cards until the balances become too much to handle. When your credit card debt gets out of control, you have to take steps to avoid a serious financial issue. recommends that you take steps to pay down your credit card debt first. This means that you should also stop using them. If you have more than one card, focus on paying one balance down at a time. You should continue making minimum payments on each card, but try to make a bigger payment on one card to help pay that balance down.

Forget these 4 bankruptcy myths

A lot of people are hesitant to file for bankruptcy simply because they have heard some of the common myths one too many times. Their concern is not based on the reality of the situation, but on some misleading piece of information repeated by friends, family members, media outlets and other sources.

It is critical that you learn how to sort the myths from the facts when considering bankruptcy. To help you get started, here are four myths to watch out for:

How do I recognize predatory lending?

Whether you are repairing your credit after a personal bankruptcy or trying to relieve yourself of crippling debt, predatory lenders may be setting their sights on you. Like other scammers, predatory lenders target the vulnerable and easily exploited – in this case, someone who needs a loan and has few options. You and other New York residents may protect yourselves by understanding how predatory lending companies work.

According to the New York State Attorney General, predatory lending involves the use of deceptive or unfair practices to lure unsuspecting consumers into substandard or abusive loans. Lenders like these usually go after those with poor credit or low income or who are minorities or elderly and easily exploited. Predatory lending companies may operate legally, or their actions can break consumer protection laws. When considering a loan, you should watch out for the following tactics that may be considered predatory red flags:

  • High-pressure sales tactics
  • Unsolicited mail, door-to-door sales or telemarketing
  • High interest rates, surprise fees and hidden term in the contract
  • Guaranteed approval of the loan regardless of credit history
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