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Shelbyville Law Blog

Bankruptcy doesn't mean giving up all of your property

Overwhelming debt means much more than just cutting back on non-essentials to pay bills. For many people in Kentucky, the reality of their debt is much more dire and may involve avoiding harassing creditor phone calls, watching unpaid bills pile up on the counter and deciding between groceries or the paying for essential medical care.

Popular media likes to portray people working hard and paying off this type of debt themselves, but doing so can be impossible for the average person. And yet, many people avoid pursuing bankruptcy. Not only is there an unfair stigma to bankruptcy, but debtors often mistakenly believe that they will lose all of their belongings.

Experian reports small gains in credit scores across age groups

The consumer credit reporting agency Experian has released its annual State of Credit report. The company's analysis of consumer debt showed small improvements in credit scores in 2017 compared to 2016. The report also highlighted the challenges faced by consumers that some in Kentucky might recognize.

Among people ages 21 to 34, the average credit score had risen four points to 638. This demographic also reduced its overall debt by 8 percent even after taking out more mortgages. The report concluded that the initial pain inflicted by the Great Recession on this age group appeared to be easing.

The pros and cons of a hardship withdrawal

Kentucky residents who have an urgent need for emergency cash may be able to take out a 401(k) hardship withdrawal. This may be available to make repairs to a home, pay emergency medical expenses or cover other emergency expenses such as rent or utility bills. To qualify for a loan, individuals cannot have access to other methods of covering those expenses. However, it may not be necessary for an employee to prove this.

The only exception would be if an employer knows that an employee has other resources such as access to a 401(k) loan. There are many consequences that an employee may want to consider before taking a hardship withdrawal. For instance, it may not be possible to make contributions to a 401(k) or other employer-sponsored plan for up to six months after taking money out. It is also important to note that taking money out of a 401(k) reduces a person's ability to benefit from compound growth.

Out of sight, out of mind: Can you hide your car from creditors?

You, like many other Kentucky residents, likely rely on your vehicle for many needs. Whether you are trying to get to work or run errands, your car can make it much easier to reach your destination as needed. You may wonder what you would do without your car, and you may begin to worry that losing it could be a real possibility if you fall behind on your loan payments.

If you default on your car loan, your creditor could begin repossession actions. If you feel concerned about having your vehicle repossessed, you may wonder what you could do to avoid the repo man. What you may want to remember, however, is that some actions may not work as well as you might think.

Americans have more spending power along with more debt

The Consumer Financial Protection Bureau has good and bad news for Kentucky residents. Americans have more credit available to them now than they have for the past two years. Logically, credit card debt has also gone up, but the really bad news is that delinquency rates have also increased. That means too many people are not paying their credit bills on time or at all.

The increase in delinquency is described as 'modest" by the agency. The country had record low delinquency rates during the financial crisis of 2007-2009. But the agency also found that today, people tend to have fewer individual credit cards than in the days before the recession. People with prime credit ratings have more than four cards today, but prior to the recession they tended to have more than five. The actual amount of overall credit being extended to Americans today is $4 trillion, down from 2008.

Bankruptcy can be a path to saving one's home

Chapter 13 bankruptcy can be a way for people in Kentucky who are drowning in debt to obtain protection that can save their home and their car while they work to regain financial stability. This kind of bankruptcy can be a good choice for people who have too high of an income to qualify for Chapter 7 bankruptcy and are struggling with mortgage debt or other major financial concerns. With Chapter 13 bankruptcy, filers can create a plan to repay their debts that stretches out over a period of three or five years.

One case in Georgia illustrates the help that can be provided by a Chapter 13 bankruptcy filing. In this case, a person's property was sold under a tax sale, which transfers title to the new owner but the existing owner retains a right of redemption. By paying off the tax bill to the purchaser, the original owner can reclaim the home and property. The standard repayment period for Chapter 13 bankruptcy is three or five years, but in this case, the tax sale required payment of the redemption amount in a one-year period. The property owner sought to include the tax redemption amount in her full repayment plan.

Why some Americans are more likely to be in debt

Kentucky ranks eighth on a top 10 list that isn't a cause for celebration for the state's residents. It's a list of the 10 states with the most residents who have debt in collection. Forty percent of Kentucky's residents have overdue debt, which is more than the national average of 33 percent.

Experts say that the problem tends to be worse in areas of the country where people have lower incomes and there are larger nonwhite populations. Louisiana, the state with the highest percentage of residents in debt, is 41 percent nonwhite. The state with the lowest percentage of resident with overdue debt is Minnesota, which has a nonwhite population of only 19 percent.

Impaired driving accident facts and statistics

Kentucky residents may find some of the statistics outlined by President Donald J. Trump in a recent proclamation to be surprising. In his proclamation, President Trump declared December 2017 as National Impaired Driving Prevention Month. The announcement included statistics showing that, on average, in the United States, one person dies in an alcohol-related car crash every 50 minutes. In 2016, alcohol-related accidents led to more than 10,000 fatalities, accounting for 28 percent of all traffic fatalities that year.

The sad thing about these statistics is that, for the most part, alcohol-related accidents are preventable. People have the choice to eliminate impaired driving by simply choosing not to get behind the wheel after drinking. Proof of the effectiveness of education and advocacy in reducing alcohol-related accidents can be seen when one compares alcohol-related accident rates from four decades ago to what is currently seen.

You can improve your credit score after bankruptcy

Dealing with any kind of debt can feel overwhelming. You may feel like many other Kentucky residents who believe that accruing debt is best left avoided. Unfortunately, not everyone can avoid accumulating outstanding balances due to a number of circumstances, and you may have found yourself facing substantial debt in various forms. Now that you need a serious approach to taking care of your liabilities, you may wonder whether bankruptcy could suit your needs.

One potential aspect that may have you questioning whether this debt relief method could help relates to the impact it could have on your credit score. You may think that lowering your score is not worth going through the bankruptcy process, but it may benefit you to know that you can help yourself improve your score once you complete the process.

Disclosure of all cash vital in Chapter 7 bankruptcy filing

Debtors looking for a fresh start in Kentucky often have the option of filing for bankruptcy. However, they must reveal all assets during the process. The denial of one woman's bankruptcy discharge in Illinois illustrates the importance of full disclosure of personal assets, including cash, on forms for the court.

The woman had sought Chapter 7 bankruptcy protection when creditors started to garnish her wages. Her court filings stated that she expected to receive approximately $10,000 from tax refunds, but she had in fact already received the money and spent some of it. When her meeting of creditors took place, she told the trustee that she had $3,500 in cash at the time of the bankruptcy filing but did not mention it because she wanted the funds to pay for rent and moving costs.

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