At the date of this article’s publication, the unemployment rate for Oregon had risen to the second highest in the nation, and each coming financial forecast appears grimmer than the last. Over the past decade, even as our state’s economy chugged steadily upward and property values seemed to increase exponentially, too many Oregon residents continued to spend beyond their means and add to credit card accounts and unsecured debt balances that already averaged beyond five figures for ordinary households. Now, with these obligations coming due (and unfortunately large portions of Oregon’s citizenry effectively forced to go further into debt from either the hospitalization of uninsured family members or simply to feed and clothe their loved ones after unemployment compensation had run out), record numbers of Oregonians have begun to seriously consider the necessity of Chapter 7 bankruptcy protection to eliminate those consumer debts that they can no longer hope to fulfill through traditional measures. Unhappily, though, the ease of admittance to bankruptcy programs – and the household’s treatment within bankruptcy protection should they be so arguably lucky as to inveigle themselves within the system – has been greatly altered after a series of legislative acts specifically designed to weaken governmental safeguards passed through the United States congress. Most Oregonian borrowers knew already that there would be some lingering injury to their family’s credit rating once they had filed for Chapter 7 or Chapter 13 bankruptcy, but, with the legitimacy of Chapter 7 debt elimination bankruptcy petitions now dependent upon the Oregon borrowers’ income relative to the median earnings of other state residents and family possessions more likely than ever before to be seized by the state as potential recompense of affected lenders, the level of harm that bankruptcy protection portends Oregon consumers may cause even the most desperate household to reconsider the maneuver before they do even more damage to their household accounts.
For Oregon borrowers that had never before even imagined that their family owned what could be considered assets under the view of the court trustee and the bankruptcy code, their potential loss of property may first seem the most troubling aspect of modern bankruptcy laws. The Bankruptcy Abuse Prevention and Consumer Protection Act changed the designation of filers’ possessions to specify the replacement value rather than the far lower resale value formerly utilized. Under the separately applied Oregon state bankruptcy codes, there are specific goods and property protected to their own cash value limitations and, in addition, certain benefits and income will not be subject to forfeiture with their own designated limits, but the practical culmination could yet be dire. For Oregon home owners concerned about the safety of their residences, the homestead exemption enacted by the legislature depends upon the value of the home (as determined by an appraisal conducted by the relevant court authorities) after the amount of the mortgage loan has been deducted. In Oregon and throughout America, if the trustee finds that the property in question would currently be worth less on the open market then the loans attached, the state exemption kicks into effect and the property will be shielded: though the borrowers shall still be liable for the balance of the loan amount and have to maintain regular payments to retain ownership. Within Oregon, specifically, the regulations allow for an equity discrepancy of thirty thousand dollars in the borrower’s favor through the homestead exemption, and, should the residence be in the process of sale, they would be able to collect thirty thousand dollars of the proceeds as well. If the Oregon borrowers have a mobile home or trailer that’s on their own lot, the exemption drops to twenty three thousand, and, should the mobile home reside on rented property, the exemption further falls to only twenty thousand dollars.
Oregon statutes feature a separate exemption for automobiles which ignores the first twenty one hundred dollars of what could be considered vehicle equity according to blue book estimations minus the existing amount of the car or truck loan. The family library (including portraits and pictures) and all musical instruments within the household are protected to six hundred dollars value under the Oregon state bankruptcy exemptions. Clothing and accoutrements (including jewelry: everything from heirloom watches to wedding rings and wedding bands) are protected to eighteen hundred dollars. Tools of trade, the definition of which would depend largely on the borrower’s career, may have a total value of less than three thousand dollars. Traditional household furniture and furnishings are also exempt to a combined total value of three thousand dollars (including food and fuel for heating and vehicles for two months), and, though this was clearly meant to apply to our more rural citizens, animals and poultry intended for use by the family have their own exemption up to one thousand dollars (with the provisions for said animals also to last for two months). Borrowers filing for Chapter 7 bankruptcy within an Oregon county may claim both a pistol and either a rifle or shotgun provided that the replacement value of either be determined to be below one thousand dollars, medical aids prescribed by physicians or hospital personnel and burial plots are both exempted regardless of cost, and an additional catch all exemption for unspecified personal possessions allows another four hundred dollars worth of household goods.
As previously written, there are separate statutes designed to protect monetary resources for Oregon households undergoing the Chapter 7 bankruptcy declaration above and beyond the federal exemptions. Necessary familial support, whether alimony or child support, is not to be touched. Funds awarded by state or federal courts as reparation for criminal victimization are absolutely protected while ten thousand dollars worth of personal injury awards are let alone. Seventy-five hundred dollars of retirement allowances and annuities are exempted as are pensions and veterans’ benefits regardless of the value. Most forms of public assistance (including medical assistance and old age assistance) will be exempted, and three quarters of all disposable income (including unemployment insurance and some disability benefits) should also be deemed safe. If necessary, financial proceeds from individual or group life insurance would also be protected no matter the amount. Depending upon the needs and desires of the Oregonian families wondering about Chapter 7 debt elimination bankruptcy, these exemptions may indeed be sufficient to protect their households’ most prized possessions and income strains, but, once the borrowers begin to add up the dollar amount of what the court trustee may judge to be their assets, few borrowers within our state would come out of a Chapter 7 bankruptcy declaration unscathed.
Additionally, there’s no longer any sort of guarantee that Oregon borrowers would even be able to be admitted to Chapter 7 debt elimination bankruptcy protection nor should every Oregon consumer find that the program will effectively handle their biggest debt problems. Chapter 7 bankruptcy isn’t for every Oregon household, of course. Since the program, according to the revamped United States Bankruptcy Code, essentially avoids all secured obligations (like home mortgages or car loans which are joined to collateral that could eventually be reclaimed once the borrower defaults), many Oregon families find that Chapter 7 – which remains the most popular form of bankruptcy protection by some degree – proceedings would not actually liquidate their most irritating debts. Back taxes, unpaid familial support, and funds owed the courts as a result of criminal trials are also all essentially rendered outside the boundaries of Chapter 7 protection, and, even though the burdens may seem the most visible emblem of unsecured burdens, both publicly and privately held student loans have been removed from the bankruptcy process following a legislative decision handed down over a decade ago. Even if the Oregon borrowers do find that erasing credit card account balances and medical bills (the major motivations for Oregonians considering the Chapter 7 bankruptcy approach) would be worth the additional risks that this strategy inevitably features, they may find entrance to the program newly difficult.
In order to automatically gain access to the Chapter 7 debt liquidation bankruptcy program, Oregon families must demonstrate that they previously made less than the average gross annual income of Oregon wage earners during the year prior to their bankruptcy declaration. In 2008, for example (check with the Oregon Attorney General’s office or one of the government websites that employs figures compiled by the United States Census Department for the current amounts), Oregon families with one member would only be able to show that they earned forty two thousand dollars. The figure increases to fifty three thousand dollars for two member families, fifty nine thousand dollars for three members, sixty six thousand dollars for four members, and seventy five thousand dollars for five members. Consumers in Oregon that find that they would not qualify for the Chapter 7 debt elimination program, no matter how great their assembled credit card bills or other debts may be, shall have no other opportunity for bankruptcy protection apart from the Chapter 13 system of debt re-organization. While the automatic stay inherent to all governmentally enforced bankruptcy programs may indeed help some borrowers in Oregon – particularly those Oregon home owners fearing the foreclosure of their primary residence – to avoid punitive actions by their lenders, the budgets calculated by the Oregon court trustee can be absolutely deadly for the household forced to struggle through this sort of bankruptcy protection. Furthermore, since the secured and unsecured loans are not actually decreased but only re-structured according to the whims of the Oregon trustee, a surprisingly large percentage of the Oregon consumers that attempt to follow through with Chapter 13 bankruptcy programs are not able to make their court mandated payments each month despite their most fervent efforts and end up defaulting upon the governmental protection to extremely negative consequences.
In the same way, many of the alternatives to Chapter 7 bankruptcy protection that increasing numbers of Oregon borrowers have attempted over the past few years fail to make much coherent sense upon close examination. Consumer Credit Counseling offers essentially the same forced budgeting as Chapter 13 bankruptcy programs but at a far greater cost and – despite what the intentionally misleading advertising verbiage that the bombardment of commercials funded by the Consumer Credit Counseling companies and their financial partners around the credit card industry would have you believe – the mark of CCC assistance upon credit reports can be even more damaging than that of bankruptcy (since, no matter what, at least consumers cannot go bankrupt again for another eight years following declaration). Debt consolidation mortgages will, at least, minimize the interest rates and greatly lower the household’s monthly obligations, but, with property values so dangerously volatile as we’ve seen around Oregon real estate over the past few years, no resident of our state should be quick to trade precious equity for budgetary breathing room. Furthermore, the lessened payments come at the expense of even greater debt loads that shall still have to be paid one day, and Oregon consumers truly interested in a lasting solution to their debt loads shouldn’t allow even rock bottom interest rates to continue unchecked for the unnaturally extended that most consolidation loans eagerly boast.
For those families within Oregon that honestly seek a final end to their credit nightmares, the debt settlement negotiation program may be the only alternative worth exploration. By exploiting creditor’s tensions about the potential liquidation of their clients debt balances through Chapter 7 bankruptcy protection, skilled settlement specialists force significant reductions (as much as sixty percent in many cases) in return for a full satisfaction of whatever balance remain following negotiation. Better still for the Oregon family’s eventual household economics, settlement professionals generally insist that their clients repay all of these debts within five years or sixty months which, though this may temporarily require restrained budgets, shall be far more advantageous to the family finances in the years following settlement: particularly when compared to the debt consolidation programs that could easily last for decades. There aren’t nearly as many debt settlement offices around – outside of Portland, most Oregonians should plan on utilizing the internet to consult with settlement professionals – but, considering the shortcomings that bankruptcy now represents and the diminishing returns of the alternatives, Oregon residents determined to repair past credit mistakes would do well to take the time for such an investigation.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
