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The New York Times recently ran an article in its business section entitled The Risk of Transferring a Car Loan to a Credit Card. The Times reported noted that several credit card issuers now promote programs in which you can transfer the outstanding balance on your car loan to a credit card. At first blush, this seems like an interesting concept. Car loans are secured debts, while credit cards are unsecured loans. If you default on a car loan, you run the risk of repossession, whereas a credit card issuer would have to sue you to collect a default, thereby giving you months to refinance or find additional money. Further, some of the credit card lenders are offering teaser rates such as zero interest for up to 18 months. Credit card issuers are desperate for new business. The great credit crunch of 2008 and new federal consumer protection laws have resulted in a significant decline in consumer credit. Credit card lending is an extremely profitable business but it depends on numbers – specifically, it depends on borrowers who pay, but who sometimes pay late, thereby racking up late fees and interest charges. And these late fees and interest charges are exactly why trading your car loan for a credit card balance may not be such a good idea. If you are extremely disciplined and can pay off the transferred balance in full when interest rates are zero or very low, you could save hundreds or thousands of dollars of interest charges.
However, credit card agreements usually contain “gotcha” provisions that jack up interest rates if you are late, along with hefty late fee charges. A $10,000 loan at zero percent is one thing, but a $10,000 loan with a 25% interest rate is something else entirely. You could find yourself making minimum payments for years and never see the principal balance go down. Further, the psychology of credit card debt works against you. When you have a car loan, you know that if you start missing payments, you car or truck is going to be repossessed. Repossession is costly and embarrassing and if you are facing a cash flow shortfall you are likely to do what is necessary to protect your transportation. By contrast, credit card debt does not have the same urgency. Since you have the option to pay a minimum payment, and you know that losing the vehicle is months away, it is far more likely that you will end up with a large, high interest credit card debt. I have not seen these debt transfers yet in a bankruptcy context but one of these transfers would be considered recent use of unsecured debt and could be deemed non-dischargeable if you filed bankruptcy within a few months after making the transfer. My sense is that this type of transfer deal could make sense for a person with excellent credit, steady income and financial discipline. Such a person could also, presumably, pay off his car loan early anyway, which makes the credit card transfer option less likely anyway. My gut tells me that there are no free lunches in life and this looks like a “free lunch” proposal. So I say “stay away.”The post Debt Consolidation Not Always a Good Idea appeared first on theBKBlog.
The New York Times recently ran an article in its business section entitled The Risk of Transferring a Car Loan to a Credit Card. The Times reported noted that several credit card issuers now promote programs in which you can transfer the outstanding balance on your car loan to a credit card. At first blush, this seems like an interesting concept. Car loans are secured debts, while credit cards are unsecured loans. If you default on a car loan, you run the risk of repossession, whereas a credit card issuer would have to sue you to collect a default, thereby giving you months to refinance or find additional money.Further, some of the credit card lenders are offering teaser rates such as zero interest for up to 18 months.Credit card issuers are desperate for new business. The great credit crunch of 2008 and new federal consumer protection laws have resulted in a significant decline in consumer credit. Credit card lending is an extremely profitable business but it depends on numbers – specifically, it depends on borrowers who pay, but who sometimes pay late, thereby racking up late fees and interest charges.And these late fees and interest charges are exactly why trading your car loan for a credit card balance may not be such a good idea.If you are extremely disciplined and can pay off the transferred balance in full when interest rates are zero or very low, you could save hundreds or thousands of dollars of interest charges.However, credit card agreements usually contain “gotcha” provisions that jack up interest rates if you are late, along with hefty late fee charges. A $10,000 loan at zero percent is one thing, but a $10,000 loan with a 25% interest rate is something else entirely. You could find yourself making minimum payments for years and never see the principal balance go down.Further, the psychology of credit card debt works against you. When you have a car loan, you know that if you start missing payments, you car or truck is going to be repossessed. Repossession is costly and embarrassing and if you are facing a cash flow shortfall you are likely to do what is necessary to protect your transportation.By contrast, credit card debt does not have the same urgency. Since you have the option to pay a minimum payment, and you know that losing the vehicle is months away, it is far more likely that you will end up with a large, high interest credit card debt.I have not seen these debt transfers yet in a bankruptcy context but one of these transfers would be considered recent use of unsecured debt and could be deemed non-dischargeable if you filed bankruptcy within a few months after making the transfer.My sense is that this type of transfer deal could make sense for a person with excellent credit, steady income and financial discipline. Such a person could also, presumably, pay off his car loan early anyway, which makes the credit card transfer option less likely anyway. My gut tells me that there are no free lunches in life and this looks like a “free lunch” proposal. So I say “stay away.”The post Debt Consolidation Not Always a Good Idea appeared first on theBKBlog.
How much does it cost to file Chapter 13? I have answered that question for nearly 20 years, and it seems that about every 5 years the local court rules provide a different answer. Well, the Nebraska Bankruptcy Court rolled out yet another compensation system for debtor’s attorneys effective December 1, and this time I think the Court got it right.
To start with, a $281 court fee is due when the case is filed. If the debtor cannot afford to pay all of that fee at once, the Court will allow a debtor to pay $75 with the filing of the case and the remaining balance of $206 within 90 days typically. In addition, most bankruptcy attorneys charge for credit reports they purchase. However, attorney fees are usually paid out over the term of the 3 to 5 year payment plan, although some attorneys charge a portion of that fee up front.
Bankruptcy courts have used a variety of compensation systems over the years. In the past attorney fees were determined by an itemized statement of time expended by the debtor’s attorney that was submitted to the Court for approval. The problem with that system is that some attorneys were charging vastly different hourly rates and spending much more time to complete routine tasks. As a result, some attorneys were being paid not on the basis of what they actually did for their client but rather on how well they could prepare billing statements.
Other courts have utilized a Flat Fee system that awarded a set amount of compensation at the beginning of the case and did not allow attorneys to apply for additional compensation when they performed new legal tasks, such as amending the payment plan when the debtor’s income changed or suspending payments when they became unemployed or injured. The obvious problem with that system is that it does not encourage attorneys to provide ongoing support to their clients and some attorneys neglected the case after their fees were paid.
Nebraska has traditionally employed a hybrid system that allowed attorneys to choose whether they would bill hourly for their services or they could accept a flat fee. Three years ago the Court created a system that allowed a flat fee upon approval of the Chapter 13 payment plan and then allow additional services to be billed out at an hourly rate. However, I believe the Court has been administratively burdened by reviewing all these fee applications, so now there is a new system. It is actually a system I recommended to the Court three years ago.
Appendix N of the Nebraska Local Rules not provides for a Flat Fee (what the Court calls a “No Look Fee”) upon approval of the payment plan. Then, if additional services are provided later on in the case, the Court has provided a list of standard compensation awards for a variety of services, like amending the plans or suspending payments or filing motions to sell property. At last I think the Court has achieved a good balance between creating a simple system to administer which provides standard compensation for standard services while at the same time providing attorneys a reward for providing ongoing services. At last the interest of the Courts, the debtors and their attorneys are aligned.
Is filing for bankruptcy really as damaging as you think it is? For a while, people have been avoiding bankruptcy because of the supposed negativity that happens afterwards. Things really have changed and as more consumers get educated about bankruptcy and how it can help you, you may see this option in a new light. [...]
By Mary Ann Pekara
Instead of opening their factory in the old General Motors plant in Delaware, the plug-in hybrid automaker, Fisker, found itself in bankruptcy in November and things are moving at a rapid pace.
Creditors will have until December 30th to vote on the bankruptcy plan for Fisker and the final confirmation hearing will take place on January 3rd.
Fisker has thousands of investors, many unsecured creditors, and a committee has been selected to represent those creditors. Between them, there could be about $725,000 to divvy up.
The state of Delaware is one of the secured creditors that has received collateral from Fisker.
Last month, Hybrid Technologies, LLC bought the $168 million loan from the federal government to Fisker, at a heavy discount.
The reason the bankruptcy is being fast tracked, according to one of Fisker's attorneys, is in an attempt to retain as much of the company's value as possible.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for December 12, 2013 Loehmann’s facing new bankruptcy U.S. judge approves ResCap’s plan to end its bankruptcy My Child Support Is Making My Chapter 13 Bankruptcy Tough
You may hear about why it is important to review your credit report annually to make sure information is current and being reported properly to the credit bureaus. But anyone considering bankruptcy should also review their report to make sure they include all of their creditors in their documentation and schedules. You are required to [...]
(305) 891-4055 - Miami Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
The Bankruptcy Court of the Middle District of Florida denied without prejudice two motions for relief from stay in the case of In re Murphy, Case No. 07-04213-TBC (Bankr.M.D.Fla. February 12, 2008)(Funk, J.) In this case, Aurora Loan Services, LLC ("Aurora") filed motions for relief from stay with respect to certain notes and mortgages on two parcels of real property. In the motions, Aurora asserted that it held the respective notes and mortgages. However, attached to each motion was a copy of a note and mortgage identifying other entities as the lenders. The affidavits attached to each motion identified Aurora as the owner and holder of the note.
The chapter 7 trustee objected to both motions and argued that Aurora had not established that it was the owner or holder of the instruments. At the hearing, Aurora did not offer any further evidence establishing a connection between it and the entity set forth in the notes and mortgages.
The court held that when challenged by an interested party, the movant must provide evidence that it is "the owner or holder of the Note and Mortgage and has standing to and a legal basis for requesting relief from the automatic stay." See In re Schwartz, 366 B.R. 265 (Bankr.D.Mass.2007), In re Maisel, 378 B.R. 19 (Bankr.D.Mass.2007), In re Foreclosure Cases, 2007 U.S.Dist.Lexis 84569 (N.D.Ohio 2007).(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases. Bankruptcy Attorney Jordan E. Bublick has filed over 8,000 Chapter 13 and Chapter 7 cases.
If you are concerned about the possibility of losing an asset, then you may want to review options on how to protect them legally prior to filing bankruptcy. Most debtors who file either chapter (Chapter 7 or Chapter 13 bankruptcy) have been able to keep their property after getting a better understanding of how to [...]
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