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Cuyahoga Falls Bankruptcy Law Blog

The effect of debt on older Americans

Older Ohio residents are still in debt when they reach retirement age according to a MoneyMagnify analysis. The analysis was conducted using information from a University of Michigan study. Conducted since 1990, it asks more than 20,000 Americans at or over the age of 50 about the state of their finances.

The survey found that over one-third of Americans in that age group carry debts other than a mortgage each month. It also found that the average credit card debt among those who carried a monthly debt balance was $4,786. Overall, they had $12,940 in debt not counting any mortgage balances. Carrying debt may make it harder for older people to get the medical care that they need that is not covered by Medicare. This may increase the odds that they spend time in a nursing home or some other institutional setting.

New rules will affect Chapter 13 bankruptcy cases

Ohio consumers who are considering filing for bankruptcy might want to be aware of new rules that may affect their cases. The rules, which were issued by Chief Justice John Roberts of the Supreme Court of the United States in April and sent to Congress, will modify several aspects of Chapter 13 bankruptcy proceedings.

One of the changes is the inclusion of a mandatory form that will be used when filing Chapter 13 bankruptcy cases. This standard form must be used unless local jurisdictions have adopted different forms that comply with the rules. The purpose of this change is to streamline Chapter 13 filings so that it will be easier for creditors to find how the debtors are proposing to treat their claims in their cases.

Trustee actions deemed invasive

Recently, Chapter 7 trustees have been asking debtors for passwords to PayPal, Amazon Prime and similar accounts. How this may impact Ohio debtors is unclear as the Justice Department does not approve of these questions. It is also unclear how the information is used or who may have access to it. The questions were asked by trustees in Maryland who demanded that debtors keep the accounts active and refrain from changing the passwords for 10 days.

Many consider the practice to be both intimidating and invasive, and it is also considered a departure from normal procedure. While trustees need to learn about any assets a debtor may have that may be eligible for liquidation, account passwords are off limits. At most, a bankruptcy trustee may ask for account information or information about recent transactions.

Responsibility for a deceased person's credit card

If the owner of a credit card dies, surviving family members might be responsible for the debt in some circumstances. However, if a person is a sole cardholder, it is likely that no one else is responsible for the debt including the surviving spouse since Ohio is not a community property state. If the card is a rewards card, the company might apply the rewards toward the debt. If this is not enough to cover the debt, the credit card company might try to collect from the estate.

An authorized user is unlikely to be responsible after the death of the main cardholder although it is important to read the specific terms of agreement for the card. The authorized user should not use the card after the main cardholder's death and should contact the issuer to be removed from the account.

Disadvantages of debt consolidation

Some Ohio consumers who are struggling with their financial obligations might be considering debt consolidation. However, one issue is that it does not address what is in many cases the root of the problem.

For example, one man was struggling to avoid filing for bankruptcy a second time. He took out a $17,000 loan from a credit union that he was supposed to pay off over five years. He then used the loan to pay off 10 credit cards. With this new debt, his interest rate went down to 8 percent, and his fixed monthly payment was $375. However, his daughter was a single mother, and he also took out a payday loan to help her with expenses. Repaying these loans left him struggling. Then his daughter had to spend a $5,000 tax refund on her children after losing her job that she had intended to use to pay him back.

How investment accounts are treated in bankruptcy

There are many issues that Ohio residents may need to be aware of when it comes to how filing bankruptcy may impact their finances. The good news for those with a 401(k) or an IRA is that money inside of those accounts are often off-limits to creditors. The only exception is that the IRS may levy those funds if there are back taxes owed.

However, even in a situation where a person owes back taxes, money inside of an account won't be levied until an individual actually receives it. It is important to note that the IRS could impose penalties on the past due balance until it is paid, which could significantly increase the amount owed.

Alfred Angelo bankruptcy trustee lends a helping hand to brides

As most brides will agree, few things are more stressful than trying to plan a wedding. Everything has to be just right in order for that one day to be a truly special one. And for many brides-to-be, it all starts with finding their wedding dress.

Sadly, hundreds of brides across the nation were sent into a panic recently when retailer Alfred Angelo Bridal abruptly closed all 61 of its stores then filed Chapter 7 bankruptcy. According to one USA Today article, store managers weren't even given advanced notice of the impending closures, meaning employees and brides alike were left shocked and unsure of what the future held.

New rule on arbitration for banks and credit card companies

Ohio consumers who may have been prevented from bringing a class action suit against a bank or credit card company because of arbitration clauses contained in their agreements may now be able to do so because of a rule issued on July 10 by the Consumer Financial Protection Bureau. The clauses generally prevented consumers from getting together to file a lawsuit. The rule will apply to new contracts and will not ban arbitration agreements. It will simply take away their power to stop class action lawsuits.

Opponents of the rule say that arbitration provides quicker and less expensive solutions to consumers. However, Wells Fargo attempted to use an arbitration clause to block lawsuits, and Congress has passed laws to prevent arbitration agreements being used in mortgage contracts and loans made to people in the military.

Instead of paying off debts with your retirement money...

There are few things worse than seeing your debt rise after retirement. You might think you're too old to rejoin the workforce or worry you won't get hired even if you did apply. Whatever the reason, it's important not to make this major mistake: paying off your debts with your retirement accounts.

If you're like most people, you probably worked incredibly hard your entire life, setting aside a sizable chunk of retirement money in the process. It's tempting to look at that money and see quick relief from your financial burden. Unfortunately, this is not the best option for a majority of people.

Court rules that property owner did not abuse bankruptcy process

Ohio residents who are struggling to cope with unmanageable financial situations sometimes seek debt relief by filing Chapter 7 bankruptcies, but their petitions may be denied if it appears that they are abusing the bankruptcy process to take unfair advantage of their creditors. A Chapter 7 trustee made this argument in the case of a Virginia man who filed a Chapter 7 bankruptcy while paying the expenses associated with maintaining two homes, but a federal bankruptcy court ruled that the man had not abused the process.

The court made its decision after considering the totality of the man's financial situation. The debtor was finding it difficult to keep up with two mortgage payments and about $60,000 in student loans after it became clear that his elderly mother-in-law would no longer be able to take care of herself. The man's wife purchased a larger home in order to accommodate her mother. The Chapter 7 trustee claimed that the man could have paid his creditors if he had sold one of his homes or made partial restitution if he had filed a Chapter 13 petition, but the court ruled that the man had not acted in bad faith.

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