Law Office of Allan E. Dunaway, PLC

Louisville Bankruptcy Legal Blog

Learning more about Chapter 7 bankruptcy

Kentucky residents who are struggling to pay their credit card or other types of debt may find that bankruptcy is an effective solution to their problem. If an individual doesn't have much in the way of assets, he or she may be eligible for Chapter 7 bankruptcy. This could allow a debtor to eliminate some or all of their unsecured debts while having the option to continue making secured debt payments.

While bankruptcy could help a person obtain debt relief, it may also result in a hit to that person's credit score. In some cases, those who file for Chapter 7 bankruptcy could see their scores go down by as much as 200 points. That could limit an individual's options when it comes to borrowing after a case is resolved. Therefore, individuals might want to look at other debt relief options prior to deciding that bankruptcy is the way to go.

A few reasons to think twice about using payday loans

Many people in the Louisville area are living paycheck to paycheck and do not realize how ill-prepared they are to handle financial emergencies and unexpected expenses. You may earn a decent wage now, but you have been known to occasionally use payday loans to help you meet some of your monthly obligations and unexpected expenses.

It is not unusual for individuals who are struggling to get by or who are low on cash to use payday loans to try to catch up or get ahead financially. However, such loans can sometimes lead to people facing further financial struggles. So, you may want to be cautious about payday loans and consider the following information about them.

Those with crushing debts often put off filing for bankruptcy

Kentucky residents who are struggling to cope with unmanageable financial situations sometimes put off pursuing their debt relief options due to the stigma surrounding personal bankruptcy. Experts have found that individuals often deal with crushing debts and daily harassment from bill collectors for months or even years before considering a bankruptcy filing. In many cases, a traumatic event such as an unexpected bill, wage garnish or lawsuit prompts them to finally take action.

The desire to avoid bankruptcy and handle financial problems without assistance can sometimes lead individuals to make unwise decisions like using their retirement savings to temporarily make ends meet. This is a mistake because these funds will generally be protected during a bankruptcy. Furthermore withdrawing them early can leave individuals financially vulnerable in their retirement years. Withdrawing money from IRA or 401(k) accounts before reaching retirement age can also lead to fees, penalties and tax bills.

How taxes and bankruptcy intersect

When Kentucky residents can't afford to pay their bills, voluntary bankruptcy could be a solution. This is a bankruptcy that's initiated by the debtor rather than a creditor. While many different types of debt can be discharged in a Chapter 7 or 13 bankruptcy, tax debt may not be one of them. That depends on the facts of a given case.

As a general rule, the tax debt must be assessed 240 or more days prior to filing. It must also be associated with a tax return that was due three or more years ago and filed two or more years ago. The bankruptcy cannot be an attempt to evade taxes or related to a fraudulent return. As a general rule, withholding taxes cannot be discharged in a bankruptcy, and they cannot be discharged if they are associated with a tax return that was never filed.

On the myths of bankruptcy, and why they aren't true

Filing for bankruptcy is a huge step in any person's life. When you file, it is likely that you will have plenty of fears, and you may even feel guilty. A significant portion of these feelings is likely due to the stigma of bankruptcy: namely that only irresponsible people use bankruptcy to get out from underneath their financial problems.

But this is a myth. Bankruptcy is a legal process, one that is a critical solution to a serious problem. It should really be seen as a tool in your arsenal to turn your life around. It is not a cheap strategy to clear debts.

Cash Advances Lead to Huge Credit Card Debt

Credit card debt can be difficult to overcome, and taking cash advances can make it so much worse. Everyone with a credit card has received this in the mail - the tempting offer to take cash advances from a credit card (such as using a credit card at an ATM). During the summer months when consumers are on that much need vacation, what could it hurt to take a little quick cash from the credit card? 

Kentucky Judge orders debt relief company to leave the state

A Franklin Circuit Judge has struck a blow to predatory debt relief peddlers, ordering a Florida-based company to cease operations within Kentucky. The decision was handed down after the company came under investigation for making allegedly misleading claims about college debt forgiveness.

Among the charges leveed are claims that the company promised to work with federal load providers to acquire loan consolidations and other debt relief options, all while seeking large payments from its clients. Whether or not the charges are valid, the company has been barred from operating in Kentucky until it complies with orders to supply documentation verifying its claims.

Advice for buying a car while in Chapter 7 bankruptcy

You might be in the middle of Chapter 7 bankruptcy proceedings, but that does not change the fact that you need to drive an automobile to and from work, take your kids to school and basically get from A to B. When it comes to purchasing a vehicle while in Chapter 7 bankruptcy, however, there are several things that bankruptcy filers will want to keep in mind.

-- Review your borrowing past and pay special attention to your borrowing related to car loans. Credit lenders will focus on your credit history after your bankruptcy is discharged. If your problem relates to situationally bad credit, they will look at it more positively than if you have had habitually bad credit. As such, if you are applying for a car loan, they'll want to see what your previous auto loan history looks like.

Frightening information about credit card debt

Nobody likes having credit card debt to pay off, but most Americans have some form of credit card debt or another, and it usually has a very high interest rate attached to it. The high-interest rates and other fees associated with most credit cards are particularly frightening for consumers, but there are some other lesser-known -- but equally frightening -- facts that consumers should know about, too.

For example, did you know that there's too much credit card debt right now? At this time, U.S. consumers owe a whopping $953.3 billion in credit card debt. According to the Federal Reserve, the debt could skyrocket to $1 trillion before the end of 2016.

Is it a bad idea to pay college tuition with my credit card?

Convenience fees charged for the use of credit cards are particularly high. For example, on average, $262 worth of convenience fees are expected for every $10,000 worth of debt. The interest on credit card debt, charged by the credit card company, is also exceptionally high. For example, interest that needs to be paid on the debt will probably outweigh any potential benefits received. Student loans offer far better interest rates.

Although the rewards associated with credit card use can be particularly good, they are only useful if one pays the balance on the credit card in full and if the card issuer does not charge the user a convenience fee for the transaction. In any other circumstances, scholastic loans are a much more affordable way to finance college tuition costs.

For some Kentucky residents, it is already too late for this blog post to be of use. Anyone who is suffering under a mountain of credit card bills knows how serious the problem is and that it is difficult to get out from under this debt. However, various legal solutions are available -- including bankruptcy -- which could help individuals resolve debt problems once and for all.

Source: Lexington Herald Ledger, "Put it on my card...or not," Sarah Skidmore, Sep. 04, 2016

Contact the Firm

Get Sound Advice In A Free Consultation

For sound bankruptcy advice you can count on, from a skilled lawyer who truly cares about your future, contact the Louisville Law Office of Allan E. Dunaway, PLC. We have two convenient locations: Louisville, Kentucky, and Jeffersonville, Indiana. Our main office in Louisville is located off the beaten path so you won't have to deal with downtown traffic and can pull right up to our door and walk right in.

Call us at 502-785-1005, or send an email message. Our law firm welcomes the opportunity to serve you in any way we can.

If for some reason personal bankruptcy is not for you, if you do not qualify for the Chapter 7 approach via the "means test" and Chapter 13 reorganization is not the answer, Allan E. Dunaway works hard to inform you of other appropriate means of debt settlement that suits your unique needs.

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