Can I Modify My Chapter 13 Bankruptcy Payment Plan?

Debtors in the Oak Park area who file for Chapter 13 bankruptcy do so for many different reasons. In some situations, your income may not allow you to file for Chapter 7 bankruptcy (in other words, you might not pass the “means test”). In other situations, you may not want a liquidation bankruptcy and feel confident in plans to repay creditors over the course of several years. In many cases, debtors file for Chapter 13 bankruptcy because it can prevent foreclosure and allow the debtor and his or her family to keep their home. Regardless of the reasons that you filed for Chapter 13 bankruptcy, what happens if you want to modify your payment plan?

Can you modify your Chapter 13 bankruptcy payment plan? What happens if you cannot make the payments outlined in your plan?

Background on Chapter 13 Bankruptcy

As a brief reminder, as the U.S. Courts website explains, Chapter 13 bankruptcy is one of two common types of bankruptcy for individuals. Typically, an individual or married couple will file either for Chapter 7 bankruptcy, which is a liquidation bankruptcy that allows for a discharge of all debts, or for Chapter 13 bankruptcy, which does not involve liquidation of the debtor’s assets and instead requires the debtor to make payments on a Chapter 13 payment plan over the course of three to five years. Once you complete the payment plan, you can have your debts discharged.

To be eligible for Chapter 7 bankruptcy, you must pass what is known as the “means test,” which, in brief, looks at your assets and income to determine whether you should be eligible to discharge your debts. If you cannot pass the “means test,” you still can be eligible to file for Chapter 13 bankruptcy. You do not need to pass any eligibility tests to file for Chapter 13 bankruptcy.

What if I Want or Need to Modify My Payment Plan?

As we mentioned, Chapter 13 bankruptcy comes with a payment plan. The court must approve this payment plan, and it must outline the payments that the debtor will make to the bankruptcy trustee for a period of typically three to five years. If you do not make payments on time—even if you miss a single payment—you may no longer be eligible to have your debts discharged at the end of your plan’s timeline. So, what can you do if you need to modify your payment plan?

Prior to filing your case, you and your bankruptcy attorney can modify your Chapter 13 payment plan as much as you wish. Once you file your case and must start making payments, however, you will need to ask the court to modify the plan. It can be possible to modify a plan based on a change in circumstances both before and after the court confirms your Chapter 13 plan. It is usually easier to modify prior to confirmation, though. Once you have filed your case but before the court confirms it, you may be able to just file an amended plan with an explanation of your change in circumstances (such as a change in income, unexpected medical emergency, or being laid off from work). At this point, your amended plan can be reviewed, and if everyone approves, the court can confirm it.

After your bankruptcy plan is confirmed, it gets a bit more complicated to modify your plan. At this point, you will need to file a motion to modify the plan and will need to provide evidence of your need to have the plan changed. Keep in mind, however, that there are certain debts that must be paid in a Chapter 13 bankruptcy, known as “priority debts,” and if the modification you are seeking would prevent such debts from being paid, you may not be able to modify your plan.

Discuss Your Options with a Bankruptcy Attorney in Oak Park

Chapter 13 bankruptcy plan modifications can be complicated, but an Oak Park bankruptcy attorney can help. Contact the Emerson Law Firm to discuss your options.

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Will the Consumer Financial Protection Bureau Lose Its Power?

Student Subprime Debt Surge

Will the Consumer Financial Protection Bureau Lose its Power?

According to a recent article in The New York Times, the Trump administration has “called for the neutering of many of the central provisions of the Dodd-Frank Act,” which could result in the Consumer Financial Protection Bureau (CFPB) losing much of the power it currently has to prevent abusive debt collection practices, and to provide other consumer protection measures. Specifically, the Treasury Department recently released a report that contended the CFPB has engaged in “regulatory overreach” and that its director should be removed. What else was in this report, and what is the future of the CFPB under the Trump administration?

Treasury Department Seeks to Roll Back Consumer Protections Under Dodd-Frank

What are some of the specific ways in which the Treasury Department wants to roll back consumer protections and the role of the CFPB? Most immediately, as the article clarifies, the Treasury Department report “recommended greater exemptions from the so-called Volcker Rule, which bans banks from trading for their own gain.” In addition, the report asked that rules for community banks be revised so that they are not under as much regulatory scrutiny from the CFPB.

The regulations that are currently in place have been extremely beneficial to consumers. Those regulations helped to bring us out of the financial crisis, and to provide consumers with protection from deceptive lending and debt collection practices. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorized much of the regulatory power of the CFPB when it was signed into law in 2010, aims to prevent unscrupulous lending practices that can harm consumers. The recent report suggests that there is more interest within the current administration in easing regulatory burdens than ensuring consumer protection.

Relation Between Dodd-Frank “Roll Back,” the CFPB, and the Financial Choice Act

As the article underscores, “the Trump administration cannot roll back the law,” meaning Dodd-Frank, “on its own.” At the same time, however, the administration does have “broad authority to determine how its rules are executed.” In other words, the administration cannot simply undo Dodd-Frank, but it may be able to change some of the fundamental ways in which the law works and the ways in which the CFPB carries out its consumer protection goals. The Treasury report pushes for various ways of “scaling back” the power of the CFPB.

Less than a week before the Treasury Department report, in pushing for the easing of regulations, the House of Representatives passed the Financial Choice Act. This proposed legislation, if it were to pass as-is in the Senate, would have tremendous impact on consumers in Oak Park and throughout the country. It would do the following:

• Exempt certain financial institutions from risk-taking restrictions in Dodd-Frank; and
• Replace Dodd-Frank’s orderly liquidation authority with a new bankruptcy code provision.

As the Financial Choice Act currently stands, analysts expect it will not pass in the Senate. However, it suggests that the CFPB could be at risk. With such risk, consumers could lose significant protections against unfair and deceptive lending practices, as well as fraudulent debt collection practices.

Discuss Your Options with an Oak Park Consumer Protection Attorney

If you have been the victim of unfair or deceptive lending practices, you may be able to file a claim. You should discuss your options with a consumer protection lawyer in Oak Park as soon as possible. Contact the Emerson Law Firm to speak with a dedicated advocate about your case.

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Student Subprime Debt Surge

More Consumers Struggling with Debt: Should We Worry?

Student Subprime Debt Surge

For quite some time, commentators and consumer protection advocates have voiced concerns about student loan debt. According to a recent report from CNBC, student subprime debt has risen drastically over the last year, contributing to the trillions of dollars of student debt throughout the country. As an article in MarketWatch explains, some student borrowers, especially those who took out student loans to pay for for-profit colleges, may be more similar than we might think to “homeowners who used shady mortgage products to finance their homes in the lead up to the housing crash.” Indeed, “borrowers who took out student loans to attend for-profit schools defaulted at the same or higher rate within five years as those with subprime mortgages.”

Now that the numbers reflect a surge in student subprime debt, what can we expect for borrowers who owe money on these loans? Is personal bankruptcy ever an option for student loan debt?

Student Loan Debt Rises While Creditworthiness of Borrowers Declines

What characterizes a subprime loan? In most cases, subprime loans are those with high interest rates that are taken out by borrowers who do not have sufficient creditworthiness to obtain a better offer. When students have poor credit scores and/or poor credit history, they can easily end up with subprime loans that for which they are unable to make required monthly payments.

According to the CNBC report, the amount of subprime debt often rises in relation to the number of borrowers with subpar credit: “As the total student loan debt continues to surge, the quality of borrowers is in steep decline.” This relationship between subprime student debt and type of borrower can also become cyclical; as more student borrowers are unable to make payments, their credit profiles also take a hit. Just how bad is the student subprime debt crisis?

Subprime Student Loan Debt Surpasses Eight Billion in the First Quarter

In the first quarter, “the total level of debt for so-called deep subprime borrowers totaled $8.2 billion,” as CNBC reported. That number represents an increase of 32% from the same period just last year. What is a “deep subprime borrower?” SNL Financial, which provided the data, is referring to borrowers who have a credit score of less than 580.

The 32% increase is surprising to commentators who have been tracking student loan debt. Indeed, as SNL researchers indicated, “it was the first year-over-year increase in more than two years and the largest jump since 2009 when high unemployment rates from the Great Recession sent many consumers back to school.”

The rise in subprime student loan debt comes at a point at which household debt is also increasing significantly, and recently it was estimated at $12.73 trillion (which shows an increase by $50 billion since 2008). Of that household debt, around $1.34 trillion is student loan debt. Of that amount, approximately 11%, or just over $147 billion, is “seriously delinquent.” While economists do not believe the rate of subprime student loan debt could result in another financial crisis, it is cause for some concern.

Discuss Your Options with an Oak Park Bankruptcy Lawyer

For borrowers with insurmountable debt, consumer bankruptcy may be an option. While it can be different to discharge student loan debt through bankruptcy, it is not impossible. An experienced bankruptcy lawyer in Oak Park can discuss your options with you today. Contact the Emerson Law Firm to learn more.

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More Consumers Struggling with Debt: Should We Worry?

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More Consumers Struggling with Debt: Should We Worry?

According to a recent article in Bloomberg, more American families are incurring debt at a particularly high rate than most of us would assume. As the article suggests, we have not seen the current rates of consumer debt in which individuals are late on payments for auto loans and credit cards since 2008.

In some cases, reports about more consumers using credit cards and buying new automobiles can actually suggest that the economy is improving or is thriving; people would not necessarily be making purchases if they were not employed and in a position to do so. However, when reports indicate that consumers are tending to fall behind on debt payments, such reports could intimate that we are heading toward another financial crisis. What else should Oak Park residents know about consumer debt and the risks of falling behind on auto loans and credit card payments?

Higher Charge-Off Rates Reflect Consumers’ Inability to Pay

Among the first indications of unpaid auto loan debt is financial companies writing down “a growing amount of auto debt in recent quarters,” according to the article. Credit card companies, too, are writing down more consumer debt. Charge-off rates for auto loans have risen from an average of less than 1.0% in the prior year to 1.6% in December 2016 and nearly the same level in March 2017. As the article clarifies, the problem is not only associated with auto loans. To be sure, “Capital One and Synchrony recently raised their forecasts for net credit-card charge-offs in 2017, citing weakness among subprime customers rather than their previous rationale of portfolio growth and aging.”

To give you a better sense in terms of credit card charge-offs, Capital One had credit card losses of just over $1 billion in the first quarter of 2016. By the end of the fourth quarter of 2016, that number had risen to $1.3 billion. By the end of the first quarter of 2017 at the end of March, Capital One’s credit card losses had reached $1.7 billion. In anticipation of even greater losses to come, the company has “boosted reserves for loan losses.”

Americans are Buying More Cars, Using Credit Cards More Frequently, and Going into More Debt

Auto loan debt has grown, and what is particularly troubling to consumer debt analysts is that borrowers are not paying down those loans. Rather, many consumers apply for an auto loan to purchase a new vehicle, and before they have paid off the debt, they obtain a loan for another automobile. Outstanding credit card debt is not too much different. Instead of charging items and then paying them off, the amount of revolving consumer credit—the balances that consumers are carrying without paying off what they have purchased—has grown enormously. As of March 31, 2011, the amount of revolving consumer debt outstanding was at $0.8 trillion, and that was at a peak of the financial crisis. Six years later, at the end of March 2017, that number had risen to $1.0 trillion.

There is some overlap among consumers with extensive auto loan debt and revolving credit card debt. What is the reason these figures have risen? Some suspect that consumers are prioritizing other payments such as medical costs— ver auto loans and credit card debt. Other analysts suggest that consumer fraud has played a role.

Contact a Bankruptcy Attorney in Oak Park

While we do not know whether the rising consumer debt could trigger another financial crisis, it is important to learn more about managing debt if you are one of these consumers. In some cases, filing for consumer bankruptcy may be a way to relieve the anxieties of debt. An Oak Park bankruptcy attorney can discuss your options with you. Contact the Emerson Law Firm today.

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Getting Back on Track When You Have Auto Loan Debt

Many consumers borrow money to pay for automobiles. For Oak Park residents who rely on their vehicles for transportation to work in Chicago and the surrounding area, it can be extremely anxiety-inducing to fall behind on their car payments. However, many Americans simply do not have the requisite savings to pay for an emergency situation and to continue paying monthly bills. For instance, if a medical emergency arises, many consumers prioritize those payments over auto loan payments, especially if someone in the family is in need of life-saving treatment. Sometimes consumer bankruptcy may be the best option.

According to a recent post from the Consumer Financial Protection Bureau (CFPB), getting behind on your car payment does not always result in repossession. In some cases, filing for personal bankruptcy may allow you to discharge medical debt and to get back on track for paying off a car loan.

Reduce the Risk of Falling Further Behind on Your Car Payment

The CFPB post indicates that “about 6 million people were at least 90 days late on their auto loan payments near the end of 2016.” In other words, if you are having trouble making your car payment, you should know that many other Americans are facing a similar struggle. However, as the CFPB suggests, many consumers do not know that they may be able to get back on track simply by having a conversation with their lender. Here are some tips for catching up on your auto loan:

• Contact your auto lender as soon as you know you will not be able to make an on-time payment. Rather than simply missing a payment and finding out about options after the fact, sometimes lenders can provide you with options so that you will not be charged a late fee and will not have to worry about a missed payment impact your credit score. In addition, by contacting your lender ahead of time, you will demonstrate that you are a responsible borrower and want to pay your loan.
• Request a payment due date change. If you are having difficulty making your auto loan payment by a specific date, your lender may be able to change the due date. For instance, if you get paid on the 15th of the month but your auto loan is currently due on the 5th of the month, your lender may be able to change your due date so that it comes after you have received your paycheck and can make your payment. This way, you may be able to avoid late fees associated with a missed payment.
• Discuss options for a payment plan. In some cases, auto lenders can work with borrowers to develop payment plans once they are behind on their loan. One option is to extend or postpone payments. By working out such a plan, borrowers can have lower monthly payments, but it can result in a lengthening of the loan and more money paid toward interest over time. However, if a lower monthly payment could mean that you can afford to pay the bill each month, such a payment plan could be very beneficial. Other payment plans include systems in which the borrower makes payments multiple times a month so that payments are spread out with paychecks. If you do work out a payment plan, it is important to understand the potential hidden costs and to discuss them with your lender. For instance, there may be fees associated with a payment plan. Be sure that you have your payment plan in writing.
• Consider a different automobile. Did you purchase a car that is simply too expensive for your current income and other monthly bills? It might be a good idea to trade in the vehicle for a car that will cost you significantly less in the long run.

A Bankruptcy Lawyer in Oak Park Can Help

In many cases, it may be difficult or even impossible to get back on track with an auto loan. Filing for personal bankruptcy may be an answer. You should discuss your case with an Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm for more information.

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U.S. Supreme Court: Time-Barred Claims Can Be Filed in Bankruptcy Proceedings

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U.S. Supreme Court: Time-Barred Claims can be Filed in Bankruptcy Proceedings

Can a debt collector file a time-barred claim as a result of the statute of limitations running out against a debtor in a consumer bankruptcy proceeding without violating the Fair Debt Collection Practices Act (FDCPA)? That was the question the U.S. Supreme Court had to decide in Midland Funding, LLC v. Johnson. The Court found ruled against the debtor in a 5-3 decision, overturning the Eleventh Circuit’s ruling in favor of the debtor.

Debtor Argues Time-Barred Claims in Bankruptcy Proceedings Prohibited by FDCPA

We have discussed this case previously, prior to it being decided by the U.S. Supreme Court. It is important to understand the facts of the case in order to appreciate the Supreme Court’s ruling. As such, we would like to give you a brief recap: In 2014, a debtor filed for Chapter 13 bankruptcy. Shortly thereafter, Midland Funding, LLC, a debt collector, filed a “proof of claim,” which asserted that the debtor owed $1,879.71 in credit card debt. The proof of claim stated clearly that the charge last appeared on the debtor’s account in May 2003, which was over 10 years prior to the debtor’s decision to file for bankruptcy.

The debtor had filed for bankruptcy in the Federal District Court for the Southern District of Alabama. Under Alabama law (Ala. Code Section 6-2-34), the statute of limitations for such a debt is six years. As such, the statute of limitations had run out, which Midland Funding, LLC clearly acknowledged in its proof of claim. The debtor argued that, by filing the proof of claim on a debt for which the statute of limitations had run, Midland Funding, LLC violated the FDCPA.

Supreme Court Weighs in on Time-Barred Claims

The Court’s decision was just released, and it ruled against the debtor. In short, the Court held that, when a creditor or debt collector files a time-barred claim in a consumer bankruptcy proceeding, such a filing does not constitute a false, deceptive, misleading, unfair, or unconscionable practice such that it is prohibited by the FDCPA.

Specifically, the decision, delivered by Justice Breyer, stated: “Like the majority of Courts of Appeals that have considered the matter, we conclude that Midland’s filing of a proof of claim that on its face indicates that the limitations period has run does not fall within the scope of any of the five relevant words of the Fair Debt Collection Practices Act.” Why did the Court decide this way? As a SCOTUSblog post reports, the decision came from “a sharply divided Supreme Court,” with Justices Ginsburg, Sotomayor, and Kagan dissenting.

The debtor argued that, among other things, a “proof of claim” is an enforceable claim, and that Midland Funding, LLC violated the FDCPA by filing a claim that was “false” due to the fact that the statute of limitations had run. The Court determined that this interpretation did not line up with the FDCPA’s prohibition against false claims. The Court also emphasized that the Bankruptcy Code creates a “delicate balance of a debtor’s protections and obligations,” and that to apply the FDCPA here “would upset that delicate balance.”

Contact a Bankruptcy Lawyer in Oak Park

Issues surrounding time-barred claims are complicated. The U.S. Supreme Court ruling will now determine how certain time-barred claims are treated, but many other questions remain. If you are unsure about debt you owe for which the statute of limitations has run out, or if you are being contacted by collection agencies about time-barred debts, you should discuss your situation with an Oak Park consumer bankruptcy lawyer. Contact the Emerson Law Firm today to get started on your case.

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