When Massachusetts residents file for bankruptcy, they are usually granted an automatic stay from creditor collection activities. In some cases, a creditor will violate the stay because of a lack of communication. Typically, the creditor won't find out about the stay until a week or two after it goes into effect. However, vital creditors such as mortgage lenders may be sought out by a debtor's legal counsel to ensure that foreclosure or other proceedings cannot start.
If this is the reason why the stay was violated, there is nothing that can be done as the violation was not a willful one. To take action against a creditor for violating a stay, it must be shown that the stay was disobeyed willfully. Debtors are advised to provide the number of their bankruptcy case to creditors if they are contacted after a stay goes into effect.
Once a creditor is notified of the stay and its obligations under the stay, any future contact could be seen as a willful violation. If a creditor does violate a stay, a debtor could be entitled to attorney fees related to filing a motion against the creditor. It is also possible to be reimbursed for costs such as renting a car after it was repossessed by an auto lender.
By filing for bankruptcy, an individual may be able to obtain relief from debt and constant creditor contact. Those who do file for bankruptcy may receive an automatic stay that prohibits a creditor from repossessing property or calling to demand payment of an overdue balance. Those who are contacted by a lender after filing may wish to talk with an attorney. The stay is generally valid and enforceable regardless of how large or small a creditor impacted by the case may be.
People in Massachusetts who work hard to keep their debts down might like to know that some types of debt are not necessarily a bad thing. Experts distinguish between good and bad debt, and recognize that some kinds of debt are unavoidable. Interest rates and reasons for taking on debt have much to do with whether or not debt can be considered good or bad.
Student loan debt is generally considered to be an investment in a person's future and can lead to a higher paying job. Likewise, investment in a home or car are considered to be positive steps, as long as someone does not purchase a house or a vehicle that he or she cannot afford.
Bad debt usually comes with high-interest rates, particularly when other options could be available. Payday loans have notoriously high interest rates, and financial experts warn against them. They suggest seeking lower interest loans or even borrowing from friends or family instead.
Credit cards fall into the category of good debt that can turn bad. Paying off balances every month is advised. Because that is not always possible, lower interest cards can help, and making on-time payments every month can save money on late fees.
Some debt is unavoidable, like medical bills. Experts advise that people with medical bills to pay should look for options, such as payment plans, negotiating costs or hiring a professional advocate to negotiate costs for you.
Medical debt, along with credit card debt, is dischargeable in bankruptcy. That means that depending on what type of bankruptcy someone files, he or she may see these debts dismissed in exchange for the liquidation of some assets, or be able to reorganization his or her debts and make payments towards them for a set period of time before remaining debt is dismissed. Every type of bankruptcy brings with it relief from debt collections. Collection calls, wage garnishing and other types of debt collection efforts are legally halted when someone files bankruptcy.
As a general rule, Massachusetts residents with student loan debt cannot have their balances discharged in bankruptcy. The reason is that there was a fear that students would try to have their debts discharged after receiving their degrees. However, if a person passes the "Brunner Test," a student loan balance may be wiped away in bankruptcy.
This test has three components, including the presence of a hardship if the debtor is required to make future payments. Furthermore, the hardship would have to last for the foreseeable future, and the debtor has to show a good faith effort to pay the balance owed. While the standard for a debtor to rid themselves of student loan debt is still high, judges are starting to become more sympathetic. More bankruptcy judges are also open to the idea of eliminating tax bills related to any amounts forgiven through federal programs.
While student loan debts are rarely discharged today, this was not always the case. Prior to 1976, money borrowed for educational purposes could be eliminated in bankruptcy. Congress modified the rule over time to allow discharge only after the loans had gone through at least five years of repayment. Further modifications to bankruptcy laws in 1998 and 2005 created even tighter restrictions.
Those who are in need of debt relief may find it by filing for Chapter 7 bankruptcy. Doing so could make it possible to have most debts eliminated without paying anything to creditors. Depending on a debtor's financial state, student loan payments may also be included as a debt eligible to be discharged. An attorney could talk more about the Brunner Test and how it may impact a student loan during a bankruptcy case.
People in Massachusetts who are struggling with debt may hesitate to file for bankruptcy because of the associated stigma. According to a report from the Notre Dame Law Review, however, waiting to file for bankruptcy can land people in even more difficult financial circumstances.
The study identified a point prior to filing for bankruptcy when people were sometimes unable to afford basic necessities such as food or faced debt collection lawsuits and asset depletion. More than two-thirds of the people surveyed spent at least two years in this stage, and almost a third spent five or more years in this stage.
Staying in this stage longer led to worse financial outcomes. For example, compared to other debtors who filed for bankruptcy in under two years, they had half the median assets. Their median debt-to-income ratio was more than 40 percent higher compared to other debtors. Unfortunately, this can hamper efforts to make a fresh start.
Experts suggest filing for bankruptcy when debts comprise over 40 percent of one's income, when a person is using debt to pay other debt or when the debts are those that can be discharged in a bankruptcy. An individual may qualify for Chapter 7 or Chapter 13 bankruptcy.
With both types of bankruptcies, the debtor may keep some assets. A Chapter 7 bankruptcy allows one to keep certain necessities. With a Chapter 13 bankruptcy, a person works out a payment plan to repay creditors over three to five years. Since filing for bankruptcy puts a stop to any creditor actions, such as foreclosure, one might be able to keep a house with a Chapter 13 bankruptcy. The repayment of debts is supervised by a trustee.
Massachusetts residents and others who are in a Chapter 13 bankruptcy can usually still get financing to buy a car. However, doing so will require court approval. In many cases, subprime lenders will be the ones to make offers to those involved in a bankruptcy proceeding. It is also possible that a bank or credit union will work with an individual if he or she has a relationship with that financial institution.
After the terms of the purchase have been negotiated, a prospective buyer will take a buyer's order to the bankruptcy trustee. Requests are generally only approved if a debtor can prove that there is a need to purchase it. Therefore, it is unlikely that a trustee will allow someone involved in a Chapter 13 bankruptcy to buy a luxury vehicle. If the trustee approves, it will send a Motion to Incur Additional Debt to the court.
The judge in a given bankruptcy case as well as the creditors involved in it will have a chance to object to accruing more debt. If the request is approved, the court will provide a debtor with an Order to Incur Additional Debt. This will be given to the dealer and lender that a person has chosen to work with. From there, the auto purchase process will proceed as it would in any other transaction.
By filing for Chapter 13 bankruptcy, an individual may be allowed to reorganize mortgage, credit card and medical debt. It may also allow individuals to keep their house or car during the debt repayment period. In some cases, it may be possible to accrue new debt if it is needed to help find a job or support a child. An attorney may help debtors learn more about the process of filing for bankruptcy.
Hip-hop fans in Massachusetts and around the country may know Kimberly Denise Jones better by her stage name Lil Kim. The diva shot to stardom in 1996 when her debut album 'Hard Core" topped the Billboard 200, but she has not always fared as well outside the recording studio. Lil Kim's money problems have provided grist for gossip columnists for several months, and media outlets have now reported that the beleaguered rapper filed a Chapter 13 bankruptcy petition in early May just days before a bank foreclosed on her Alpine, New Jersey, mansion.
The artist's Chapter 13 filing suggests that her money issues are largely a result of declining income. Lil Kim says that she earned more than $800,000 in 2016, but court documents reveal that her income fell by more than 50 percent to $398,000 in 2017. The rapper claims that she now earns $18,286 per month and pays $12,784 in expenses.
Assets owned by Lil Kim include a 2000 Mercedes-Benz, a 2005 Bentley and jewelry worth about $25,000. Court documents reveal that Kim owes more than $4 million in secured and unsecured debts including $664,474 in delinquent mortgage payments on the New Jersey mansion she purchased in 2002. Media reports claim that she also owes $1.47 million in back taxes.
Even highly successful people can find themselves in unmanageable financial situations. The bankruptcy laws were drafted to allow individuals to escape crippling debt and provide them with the possibility of a fresh start, but myths and misconceptions prevent many people from taking action. Attorneys with debt relief experience may help dispel these misunderstandings and explain how filing a Chapter 7 or Chapter 13 personal bankruptcy petition puts an immediate end to creditor harassment and opens the door to a new financial future.
Massachusetts individuals and couples sometimes consider bankruptcy when they don't have enough money to pay their bills. However, there are some important things to know about bankruptcy laws and what types of debts can or cannot be discharged.
Most unsecured debts such as credit cards, utilities, payday loans and past-due rent may be discharged. These debts often make up a large part of Chapter 7 bankruptcy claims. Chapter 7 bankruptcy could help a low-income individual or couple get a fresh financial start after job loss or a serious illness. Although there are some obvious benefits to filing for this type of bankruptcy, it's important to note that the court could sell a person's property to help pay back some of their debts before they are discharged.
For those who want to keep their home, vehicles and other valuable property but have trouble paying all of their debts in full every month, Chapter 13 bankruptcy may be an option. This type of debt relief may allow people to include some federal income taxes and debts related to marital settlements. Debts are not immediately discharged with Chapter 13 bankruptcy; individuals and married couples who choose this option enter into a payment plan that spreads the debts over several years.
Some debts are difficult to have discharged in bankruptcy. For example, student loan debt, federal taxes and homeowners association fees are typically not discharged. Although a person might qualify for an exception, the approval process may be long and potentially expensive. Those with these types of debts may consult with an experienced bankruptcy attorney for advice regarding how to handle these and other debts.
As people in Massachusetts and throughout the country get older, their healthcare expenses generally increase. One way to cover some of these expenses is to apply for Medicare. Individuals are eligible to enroll starting three months prior to turning 65 and for another four months after turning 65. Those who work for a company that has more than 20 employees can enroll for Medicare Part B and Part D after retirement without penalty.
It is important to plan for deductibles and other out-of-pocket costs that may be incurred even after signing up for Medicare. These can be covered by a Medicare Advantage program or by opting for other supplement plans. Medicare Advantage is sometimes referred to as Medicare Part C. Individuals may also be able to reduce their healthcare expenses in retirement by simply looking at their bills and asking questions.
There is a chance that something has been coded improperly or otherwise put into a bill by mistake. Those who receive medical services are urged to never assume that they owe whatever they have been asked to pay. A third party can review an invoice to help ensure that it is accurate. To make it even easier to pay healthcare costs in retirement, individuals can contribute up to $3,450 in 2018 to a health savings account.
Anyone who is having trouble paying their medical bills may be able to have them discharged through bankruptcy. A Chapter 7 bankruptcy proceeding may allow debts to be discharged immediately while Chapter 13 protection allows a person to have the debt reorganized and repaid over a period of three or five years. While a bankruptcy case is open, creditors are generally unable to contact a debtor or take action such as repossessing property or foreclosing on a home.
Some residents of Salem, Massachusetts, may be finding themselves deeper in consumer debt these days. If so, they are following a national trend. According to a leading financial institution, consumer borrowing is at an all-time high.
Nonmortgage consumer debt is approaching $4 trillion nationwide, and it is possible that it will exceed the 4-trillion mark by the end of 2018. According to the institution, the largest portion of this figure is credit cards, auto loans and student loans. In terms of a debt-to-income ratio, the percentage of consumer debt to disposable income is higher than it was in the years preceding the mortgage collapse of the last decade.
There may be several reasons for the rise. First, interest rates are low for both credit cards and auto loans. Second, the cost of post-secondary education continues to rise, leading to an increase in the student loan debt. Finally, consumers may be feeling more comfortable in both their own finances and the economy.
On the good side, the default rate remains relatively low at present. On the other hand, the Federal Reserve is expected to raise interest rates later this year. For those with variable rate loans, an increase in payments on those loans can be expected.
Many people do not foresee financial trouble until it is too late. Increased borrowing may fit into the monthly budget at present, but an illness, a job loss or unexpected expenses can do a great deal of damage to a person's finances. If someone begins to default on payments, the cost of credit becomes more expensive. For individuals who are experiencing financial distress, meeting with a nonprofit credit agency or a bankruptcy attorney is a wise decision. In some cases, filing for bankruptcy can forgive some of a person's debt and provide him or her with much-needed financial relief.
Massachusetts residents who are struggling with overwhelming debt often put off filing for bankruptcy because they worry that a Chapter 7 or Chapter 13 petition will ruin their credit and make future borrowing difficult or impossible. However, a report recently released by the online financial exchange Lending Tree suggests that these fears may be exaggerated. Researchers discovered that 43 percent of Americans who file a bankruptcy have credit scores of 640 or higher just a year later, and this figure rises to 65 percent after three years.
The Lending Tree report also reveals that a previous bankruptcy may not have much of an influence on auto loan rates. While individuals who take out a $15,000 car loan within a year of filing for bankruptcy pay about $2,171 more in finance charges, these additional costs drop by almost two-thirds to $799 within two years.
However, experts say that recovering from a bankruptcy quickly involves planning. Financial planners advise those who have filed a personal bankruptcy to budget carefully and borrow sparingly to avoid falling into the debt trap once again. They also urge debtors to look at the positive aspects of pursuing debt relief and the fresh start that taking action can provide.
Attorneys with experience in this area may be familiar with several myths and misunderstandings surrounding personal bankruptcy. A lawyer could address such issues by explaining to a client how the bankruptcy laws were not written to punish poor decisions but to provide second chances. Legal counsel could also point out that filing a Chapter 7 or Chapter 13 bankruptcy petition will prompt an automatic stay that puts an immediate end to all collection efforts and protects paychecks from garnishments.