The Downside of an Uptick: As Economy Improves, Debtors Should Watch Out for Collections, Says Cincinnati Bankruptcy Lawyer

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As the economy improves, the future is finally looking up for many; however, many creditors have waited patiently until there are assets to seize for the moment to pounce. Cincinnati bankruptcy lawyer Eric Steiden says people with a great deal of debt who are finally finding work should prepare for options, like bankruptcy, when creditors come knocking with lawsuits and other collection methods.

People who have struggled to meet their financial obligations and are just now attaining some amount of stability may find themselves in the eye of the storm, I'm afraid," said Eric Steiden, Cincinnati bankruptcy lawyer.

After a very difficult decade, the economy in Ohio is showing slow, but steady, signs of improvement. The state unemployment rate has gone from 10.6 percent in mid-2009 to 6.7 percent in December 2012, according to the U.S. Bureau of Labor Statistics. The national recession has been over since 2009, according to the National Bureau of Economic Research. In one piece of evidence that seems to show that fewer are hitting the bottom, bankruptcies decreased 14 percent in Ohio in 2012, dropping from 58,846 in 2011 to 50,641 in 2012, according to statistics released from the two U.S. District Courts in Ohio.

However, that last indicator can be deceptive, said Eric Steiden, Cincinnati bankruptcy lawyer. As the economy continues to improve, bankruptcies may actually go up, and those who have struggled but are now getting ahead must start watching out for creditors, he said.

"You may have shaken off debt collectors in the past few years if you didn't have anything to give," Steiden said. "But if you've finally found a job and are beginning to make ends meet, watch out — your creditors may come after you now."

Creditors can sue debtors to collect. With a judgment, they then have the option of garnishing wages or putting liens on assets. However, if a person has no wages and no assets, there is not anything for creditors to go after, making the expense of litigation hardly worth the effort, Steiden said.

Now that more people have jobs and are getting back on their feet, debt collectors may see the opportunity to pounce, Steiden said.

"People who have struggled to meet their financial obligations and are just now attaining some amount of stability may find themselves in the eye of the storm, I'm afraid," Steiden said. "Creditors see a steady paycheck as a means to make regular payments. If there are too many creditors built up from years of hard times, it could overwhelm the debtor."

People who find themselves overwhelmed with collection demands may be able to turn to Chapter 7 bankruptcy, Steiden said. Under Chapter 7 bankruptcy, the court appoints a trustee, who will liquidate assets that are not exempt and use the funds to pay creditors. Most remaining debts are then discharged.

Many assets are exempt under federal and state law, including (but not limited to):

  •     One parcel of real property that is used as a residence, for a value up to $21,625.
  •     A motor vehicle for a value up to $3,450.
  •     Up to $425 worth of cash, money due or payable, tax refunds and money in bank accounts.
  •     Up to $11,525 worth of household furnishings, including clothes, appliances, book and hunting and fishing equipment.
  •     Jewelry, for a value up to $1,450.
  •     Tools, books, and other work assets for a value up to $2,175.

A Cincinnati Chapter 7 bankruptcy attorney can help local residents determine what, among their assets, may be exempt, Steiden said.

"I understand that bankruptcy may seem like a scary and undesirable choice, especially if you've just found a job and feel like your life is finally getting back in order," Steiden said. "However, bankruptcy can be an opportunity to truly begin life anew after a difficult time."

Eric Steiden, of the Steiden Law Offices, is a Cincinnati bankruptcy lawyer who represents clients in Chapter 7 and Chapter 13 bankruptcy. The Steiden Law Offices has offices in Florence and Covington, as well as Cincinnati, and has served clients in both Kentucky and Ohio.

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