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Council Bluffs Bankruptcy Law Blog

Endeavour files for bankruptcy protection

There are times when consumers and even businesses end up in financial dilemmas. Some Iowa readers may be aware that a company, Endeavour International Corp, recently filed for Chapter 11 bankruptcy protection. This proceeding is designed to allow the company to restructure its debt with the goal of stabilizing its finances and providing a framework for making it competitive in the marketplace.

Endeavour is an oil and gas exploration company which had a number of forbearance agreements with creditors in place after missing interest payments on existing debt. The grace period under the forbearance agreements expired on Oct. 1, and Endeavour was not able to meet the interest payments again. Apparently using the decision to file for Chapter 11 relief to its advantage, a restructuring support agreement was reached with its creditors that will decrease its outstanding debt by $568 million. The annual interest will also be reduced by 43 percent, but the creditors are demanding Endeavour emerge from bankruptcy protection by April 2015.

Creditor harassment and what creditors are permitted to do

It's not uncommon for consumers who owe debts to receive collection calls from creditors. Understandably, debt collectors will do almost anything in their power to collect on overdue debts. However, it's important for Iowa consumers to be aware of when debt collectors are crossing the line and what they can do about creditor harassment.

Collection agencies are allowed to contact consumers by phone, mail and in person. They may also contact a consumer's family and friends in an attempt to locate a person's whereabouts. When speaking with a collection agency, the representatives are permitted to discuss whom the original creditor is and the amount that is owed. They can also negotiate a payment arrangement and offer a settlement. While debt collectors are permitted to do certain things in order to collect on debts, there are a number of activities they are not allowed to do.

Paying credit card debt vs student loans

Sometimes, there are circumstances that arise that require individuals to use their credit cards or take out student loans. Consumers may wonder what debts they should start tackling when the bills start piling up. It's recommended that Iowa consumers pay off credit card debt first.

One individual has saved up $8,000 and has student loans, plus credit card balances. The person does not know whether he or she should pay the accrued interest for the student loans or pay off the credit cards, which all have different balances. The recommendation is for the individual to pay off the credit card debt first. When individuals carry balances, it can drastically take away from their finances. In addition, individuals who owe student loans have more protections and tax-deductible interest.

CFPB asked to include medical bills in supervision

The Dodd-Frank Act states that the Consumer Financial Protection Bureau has the authority to supervise larger participants for consumer financial products such as debt collection. A report published by the National Consumer Law Center requests for the CFPB to supervise large Iowa collection agencies that collect on overdue medical bills. Currently, medical debt is not included in CFPB supervision.

Larger participants are companies that receive over $10 million. However, the rule does not include medical debt in the $10 million threshold. Debt collection agencies that only collect on medical bills or only have a small number of medical accounts are able to avoid the supervision from the CFPB. It has been recommended that the CFPB include agencies that collect on medical debt into its supervision so that consumers are protected.

RadioShack dangerously close to Chapter 7 bankruptcy

A business, just like an individual person, can find itself in financial difficulty. However, just like a person in Iowa or in any other state, a business also has the option of filing for bankruptcy. RadioShack may now be looking at the possibility of having to file a Chapter 7 bankruptcy due to its continuing trend of profit losses.

The company's latest quarterly earnings reports have revealed a pattern of profit losses and declining revenues for the company. This has prompted many Wall Street analysts to drop the company's price target for its stocks dramatically. RadioShack has confirmed that if the company cannot restructure its debt or find a buyer, it may have to file a Chapter 7 bankruptcy.

Maxed out cards can significantly affect credit card debt

Credit cards work well in case of emergencies and can also help build credit. Having a large amount of credit card debt can have a dramatic impact on Iowa consumers' credit scores. A major influence on calculating credit scores is how much of the available credit limit consumers have used.

Consumers who are using over 30 percent of their available credit limit can damage their credit scores. In addition, a majority of credit card companies charge fees to consumers who go over the credit limit. For consumers to avoid having high credit card debt, it's recommended to keep from going over their credit limit. Consumers can do this in a variety of ways, such as splitting up their purchases over multiple cards instead of charging one big purchase.

How proposed credit score model could affect medical bills

Injuries and serious medical conditions could result in mounting medical debt. When individuals cannot afford their medical bills, their accounts are typically forwarded to collection agencies. It may be important for Iowa consumers to know that medical debt can stay on their credit for years, but that could soon change.

The Consumer Financial Protections Bureau discovered that consumer credit scores are often over-penalized due to medical bills. In addition, a study determined that the scoring models that are used may not accurately depict the credit worthiness of consumers whose medical debts are in collections. Those medical debts can stay on a consumer’s credit reports for years, even after the debt has been settled or paid off. Negative information appearing on credit reports can make it difficult to get home loans and, sometimes, even jobs.

Medical bills will have less weight on credit scores

Millions of individuals are struggling to pay off medical debt. This is especially true for medical bills that have ended up in collections and negatively affected credit scores. Iowa consumers may see their credit scores go up due to changes made by FICO regarding medical bills.

According to a report by the Consumer Financial Protection Bureau, consumers are being punished for medical bills, which are not relevant to their credit worthiness and should not be a contributing factor in someone’s ability to get approved for a loan. In the recent weeks, FICO made an announcement that there will be changes to how it analyses credit scores. FICO is a company that is in charge of calculating credit scores and is used by most lenders to determine if individuals are credit-worthy.

Useful strategies for paying credit card debt

Credit cards are useful in building credit and for emergencies. However, if they are not used properly, they can turn into an avalanche of credit card debt. Those who charge $3,000 may not be aware that they end up paying back $11,000 at 17 percent interest. There are strategies Iowa consumers can use to pay their cards the right way.

Credit card companies average the consumer’s balances on a daily basis throughout the month, which is what helps to calculate the monthly interest rate. It can be helpful to consumers to start paying their credit card bills as soon as they get them to reduce their interest rate. Apart from paying the bills sooner, it is also helpful to double up on the minimum monthly payments.

How to defend against creditor harassment

Americans have seen the economy start to take a positive spin, but there are still one-third of consumers who were turned over to collections last year. It’s likely that a number of Iowa consumers faced creditor harassment, and aggressive debt collection tactics have become a major issue. Debts that reached collections means that consumers failed to pay bills, including credit cards and child support.

A majority of complaints that are received by the Consumer Financial Protection Bureau are involving debt collectors. A recent study by Urban Institute revealed that 35 percent of consumers have been turned over to collections, and millions have approximately $5,200 in delinquent debts. It’s important for consumers to know their rights under the Fair Debt Collection Practices Act, and one of the rules is that collectors are not allowed to threaten or harass consumers.

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