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Understanding The Concepts of....
Credit ,Debt & Bankruptcy
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Credit allows consumers to finance transactions without having to pay the full cost of the merchandise at the time of the transaction. A common form of consumer credit is a credit card account issued by a financial institution. Merchants may also provide financing for products which they sell. Banks may directly finance purchases through loans and mortgages.
The law of consumer credit is primarily embodied in federal and state statutory laws. These laws protect consumers and provide guidelines forth credit industry.
States have passed various statutes regulating consumer credit. The Uniform Consumer Credit Code (http://www.law.cornell.edu/uniform/vol7.html#concc) has been adopted in seven states and Guam. It purpose is to protect consumers obtaining credit to finance their transactions,ensure that adequate credit is provided, and govern the credit industry in general.
Congress passed the Consumer Credit Protection Act (http://www.law.cornell.edu/uscode/html/uscode15/usc_sup_01_15_10_41.html) in part to regulate the consumer credit industry. It requires creditors to disclose credit terms to consumers. The Consumer Credit Protection Act also protects consumers from loan sharks, restricts the garnishing of wages, and established the National Commission on Consumer Finance to investigate the consumer finance industry. Credit card companies and credit reporting agencies are also regulated by the Act. The Act also prohibits discrimination based on sex or marital status in the extending of credit. The Act also regulates certain debt collectors.
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Personal bankruptcy under Chapter 7
Personal Bankruptcy is the filing of a petition with the bankruptcy court to obtain protection from collection efforts of your creditors. It is normally triggered when an individual’s debts exceed current income and property. At the end of bankruptcy, some or all of the individual’s debts will be discharged.
Bankruptcy involves a Federal court proceeding in which the individual’s obligations are balanced against his or her creditor's rights. The individual’s hope is to reduce or eliminate the debt completely . The creditor's objective, on the other hand, is to collect as much of the debt as possible. The bankruptcy proceeding is the forum in which the debtor and the creditor resolve differences. A judge will ultimately decide what you still have to pay and what will be discharged.
Business Bankruptcy under chapter 7
Some companies are so far in debt or have other problems so serious that they can't continue their business operations. They are likely to "liquidate" and file under Chapter 7. Their assets are sold for cash by a court appointed trustee. Administrative and legal expenses are paid first, and the remainder goes to creditors. Secured creditors will have their collateral returned to them. If the value of the collateral is not sufficient to repay them in full, they will be grouped with other unsecured creditors for the rest of their claim. Bondholders, and other unsecured creditors, will be notified of the Chapter 7, and should file a claim in case there's money left for them to receive a payment.
Stockholders do not have to be notified of the Chapter 7 case because they generally don't receive anything in return for their investment. But, in the unlikely event that creditors are paid in full, stockholders will be notified and given an opportunity to file claims.
Chapter 7 involves attorneys, a large amount of paper work, court appearances and there is no guarantee that your debts will be discharged. You are however, guaranteed to ruin your credit for up to 10 years and be the worst credit risk to future lenders and employers.
Chapter 11 Bankruptcy
What is Chapter 11 bankruptcy?
- Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.
Under Chapter 7 bankruptcy, the company stops all operations and goes completely out of business. A trustee is appointed to "liquidate" (sell) the company's assets and the money is used to pay off the debt, which may include debts to creditors and investors.
The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other assets of the company. They know they will get paid first if the company declares bankruptcy.
Bondholders have a greater potential for recovering their losses than stockholders, because bonds represent the debt of the company and the company has agreed to pay bondholders interest and to return their principal. Stockholders own the company, and take greater risk. They could make more money if the company does well, but they could lose money if the company does poorly. The owners are last in line to be repaid if the company fails. Bankruptcy laws determine the order of payment.
Chapter 11 involves attorneys, a large amount of paper work, court appearances and there is no guarantee that your debts will be discharged. You are however, guaranteed to ruin your credit for up to 10 years and be the worst credit risk to future lenders and employers.
Chapter 13 Bankruptcy
What is Chapter 13 bankruptcy?
Chapter 13 - The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) Chapter 13 will severely impact your credit rating.
After filing a chapter 13 bankruptcy it will be difficult to obtain any line of credit, including credit cards, loans, even rental and lease agreements.
Chapter 13 involves attorneys, a large amount of paper work, court appearances and there is no assurances as to how much you will need to pay back. You are however, guaranteed to ruin your credit for up to 10 years and be the worst credit risk to future lenders and employers.
Don't let debt take another day of your life. Get relief for yourself - and for those who depend upon you. Call THE MINT today!
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Credit and Your Consumer Rights
A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for credit, insurance, employment, and even leases. They can use it when they choose to give or deny you credit or insurance, provided you receive fair and equal treatment. Sometimes, things happen that can cause credit problems: a temporary loss of income, an illness, even a computer error. Solving credit problems may take time and patience, but it doesn’t have to be an ordeal.
The Federal Trade Commission (FTC) enforces the credit laws that protect your right to get, use and maintain credit. These laws do not guarantee that everyone will receive credit. Instead, the credit laws protect your rights by requiring businesses to give all consumers a fair and equal opportunity to get credit and to resolve disputes over credit errors. This brochure explains your rights under these laws and offers practical tips to help you solve credit problems.
Your Credit Report
Your credit report contains information about where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Consumer reporting companies sell the information in your report to businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. Under the Fair Credit Reporting Act:
- You have the right to receive a copy of your credit report. The copy of your report must contain all the information in your file at the time of your request.
- Each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – is required to provide you with a free copy of your credit report, at your request, once every 12 months. Under federal law, you’re also entitled to a free report if a company takes adverse action against you, like denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
- You have the right to know who asked for your report within the past year – two years for employment related requests.
- If a company denies your application, you have the right to the name and address of the consumer reporting company they contacted, provided the denial was based on information given by the consumer reporting company.
- If you question the accuracy or completeness of information in your report, you have the right to file a dispute with the consumer reporting company and the information provider (that is, the person, company, or organization that provided information about you to the consumer reporting company). Both the consumer reporting company and the information provider are obligated to investigate your claim, and responsible for correcting inaccurate or incomplete information in your report. For details, see How to Dispute Credit Report Errors at ftc.gov/credit.
- You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.
Your Credit Application
When creditors evaluate a credit application, they cannot engage in discriminatory practices.
The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but they may not use it to discriminate against you when deciding whether to grant you credit.
The ECOA protects consumers who deal with companies that regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law. Businesses applying for credit also are protected by this law. Under the Equal Credit Opportunity Act:
- You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.
- You have the right to have reliable public assistance considered in the same manner as other income.
- If you are denied credit, you have a legal right to know why.
Your Credit Billing and Electronic Fund Transfer Statements
It is important to check credit billing and electronic fund transfer account statements regularly because these documents may contain mistakes that could damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the company and dispute the error immediately. The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:
- charges or electronic fund transfers that you – or anyone you have authorized to use your account – have not made;
- charges or electronic fund transfers that are incorrectly identified or show the wrong date or amount;
- math errors;
- failure to post payments, credits, or electronic fund transfers properly;
- failure to send bills to your current address – provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends;
- charges or electronic fund transfers for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification.
The FCBA generally applies only to “open end” credit accounts – credit cards and revolving charge accounts, like department store accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, like an automobile loan. The EFTA applies to electronic fund transfers, like those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.
Your Debts and Debt Collectors
You are responsible for your debts. If you fall behind in paying your creditors, or if an error is made on your account, you may be contacted by a “debt collector.” A debt collector is any person, other than the creditor, who regularly collects debts owed to others, including lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.
The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money you owe for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts. Under the Fair Debt Collection Practices Act:
- Debt collectors may contact you only between 8 a.m. and 9 p.m.
- Debt collectors may not contact you at work if they know your employer disapproves.
- Debt collectors may not harass, oppress, or abuse you.
- Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.
- Debt collectors must identify themselves to you on the phone.
- Debt collectors must stop contacting you if you ask them to do so in writing.
Solving Your Credit Problems
Your credit report can influence your purchasing power, as well as your opportunity to get a job, rent or buy an apartment or a house, and buy insurance. When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.
If you are having problems paying your bills, contact your creditors immediately. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don’t wait until your account has been turned over to a debt collector.
Here are some additional tips for solving credit problems:
- If you want to dispute a credit report, bill or credit denial, write to the appropriate company and send your letter “return receipt requested.”
- When you dispute a billing error, include your name, account number, the dollar amount in question, and the reason you believe the bill is wrong.
- If in doubt, request written verification of a debt.
- Keep all your original documents, especially receipts, sales slips, and billing statements. You will need them if you dispute a credit bill or report. Send copies only. It may take more than one letter to correct a problem.
- Be skeptical of businesses that offer instant solutions to credit problems: There aren’t any.
- Be persistent. Resolving credit problems can take time and patience.
- There is nothing that a credit repair company can charge you for that you cannot do for yourself for little or no cost.
Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems.
The Federal Trade Commission works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.For information on the statue governing the Fair Credit Reporting Act please click the linkprovided.
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Chapter 7 Bankruptcy
Personal bankruptcy under Chapter 7
Personal Bankruptcy is the filing of a petition with the bankruptcy court to obtain protection from collection efforts of your creditors. It is normally triggered when an individual’s debts exceed current income and property. At the end of bankruptcy, some or all of the individual’s debts will be discharged.
Bankruptcy involves a Federal court proceeding in which the individual’s obligations are balanced against his or her creditor's rights. The individual’s hope is to reduce or eliminate the debt completely . The creditor's objective, on the other hand, is to collect as much of the debt as possible. The bankruptcy proceeding is the forum in which the debtor and the creditor resolve differences. A judge will ultimately decide what you still have to pay and what will be discharged.
Business Bankruptcy under chapter 7
Some companies are so far in debt or have other problems so serious that they can't continue their business operations. They are likely to "liquidate" and file under Chapter 7. Their assets are sold for cash by a court appointed trustee. Administrative and legal expenses are paid first, and the remainder goes to creditors. Secured creditors will have their collateral returned to them. If the value of the collateral is not sufficient to repay them in full, they will be grouped with other unsecured creditors for the rest of their claim. Bondholders, and other unsecured creditors, will be notified of the Chapter 7, and should file a claim in case there's money left for them to receive a payment.
Stockholders do not have to be notified of the Chapter 7 case because they generally don't receive anything in return for their investment. But, in the unlikely event that creditors are paid in full, stockholders will be notified and given an opportunity to file claims.
Chapter 7 involves attorneys, a large amount of paper work, court appearances and there is no guarantee that your debts will be discharged. You are however, guaranteed to ruin your credit for up to 10 years and be the worst credit risk to future lenders and employers.
Chapter 11 Bankruptcy
What is Chapter 11 bankruptcy?
- Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.
Under Chapter 7 bankruptcy, the company stops all operations and goes completely out of business. A trustee is appointed to "liquidate" (sell) the company's assets and the money is used to pay off the debt, which may include debts to creditors and investors.
The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other assets of the company. They know they will get paid first if the company declares bankruptcy.
Bondholders have a greater potential for recovering their losses than stockholders, because bonds represent the debt of the company and the company has agreed to pay bondholders interest and to return their principal. Stockholders own the company, and take greater risk. They could make more money if the company does well, but they could lose money if the company does poorly. The owners are last in line to be repaid if the company fails. Bankruptcy laws determine the order of payment.
Chapter 11 involves attorneys, a large amount of paper work, court appearances and there is no guarantee that your debts will be discharged. You are however, guaranteed to ruin your credit for up to 10 years and be the worst credit risk to future lenders and employers.
Chapter 13 Bankruptcy
What is Chapter 13 bankruptcy?
Chapter 13 - The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) Chapter 13 will severely impact your credit rating.
After filing a chapter 13 bankruptcy it will be difficult to obtain any line of credit, including credit cards, loans, even rental and lease agreements.
Chapter 13 involves attorneys, a large amount of paper work, court appearances and there is no assurances as to how much you will need to pay back. You are however, guaranteed to ruin your credit for up to 10 years and be the worst credit risk to future lenders and employers.
Don't let debt take another day of your life. Get relief for yourself - and for those who depend upon you. Call THE MINT today!
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