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Chicago debt collection attorneysAccording to the August report from the U.S. Federal Reserve, the amount of unpaid credit card debt in the U.S. has been dropping since the start of the COVID-19 pandemic. Outstanding consumer credit card debt in July was reported as $994.7 billion, which is down from $996.8 billion in May and $1.078 trillion in Quarter 1 of 2020. Declining credit card debt is a predictable response to a downturn in the economy. In fact, both consumers and credit card companies have changed their behavior because of the pandemic

Consumers’ Approach to Debt Has Changed

Millions of Americans lost their jobs, were put on leave, or had their hours reduced in response to the COVID-19 outbreak. When consumers are uncertain about their job income, many will become more risk-averse about taking on credit that they may not be able to repay. The pandemic affected the activities of cardholders in several ways:

  • Many stores where consumers might use their cards were closed for weeks or months because of state mandates.
  • Consumers are staying at home more often, which means they spend less on travel and dining.
  • Most consumers received stimulus payments from the federal government, which some used to pay down their credit card balance.

How Credit Card Companies Have Adjusted

Credit card companies have also responded to the economic effects of the pandemic to protect themselves and help their clients. Many companies are working with existing customers who are facing an unexpected economic hardship that makes it harder for them to make monthly payments. Companies can provide relief by modifying the debt agreement to reduce monthly payments and interest rates or to waive late fees.

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Contesting Bankruptcy Fraud from Holiday ShoppersThe average U.S. consumer takes on more than $1,000 in debt each December – much of it related to holiday shopping and put on credit cards. When it comes time to repay those debts, some consumers struggle to keep up with minimum payments and eventually default on their debts. Debtors who qualify for bankruptcy can put unsecured creditors such as credit card companies in a difficult position because the debtor may be able to discharge all or part of their credit card debt at the end of the bankruptcy. Creditors can stop or limit the bankruptcy process if they can show that the debtor is trying to commit fraud.

Amassing Debt

One way that bankruptcy fraud can occur is when the filer takes on debt that they never intended to repay. For instance, a debtor who intends to file for bankruptcy may use a credit card to purchase gifts for the holidays because they believe that they can discharge the debt later. The credit card company may suspect the debtor’s intention and can file a claim of fraud with the bankruptcy court. If the claim is proven, the court may order that the fraudulent debt is ineligible for discharge or dismiss the case.

Presumption of Fraud

It can be difficult for a creditor to prove that the debtor is committing bankruptcy fraud by including debts that they did not intend to repay. Unless the debtor confesses their intentions, the creditor will rely on circumstantial evidence from which the court can reasonably conclude that the debtor intended to commit fraud. For instance, there may be records of the debtor inquiring about bankruptcy or meeting with an attorney before taking on the debt. U.S. bankruptcy law presumes that some financial transactions by a bankruptcy filer are fraudulent and ineligible for discharge, including:

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Illinois Enacting New Rules for Credit Card Companies, Debt BuyersThe Illinois Supreme Court has adopted new rules regarding procedures for credit card companies and debt buyers who file lawsuits against debtors. The rules will go into effect on Oct. 1 and will apply to both new cases and active cases that have not reached a judgment. The new rules do not apply to an original creditor that is not a credit card company. The rules create new requirements that are meant to force creditors to be more timely and thorough in filing specified motions in court. There are three notable rule changes:

  1. New Affidavit Requirements: A credit card company or debt buyer must use a new affidavit form when filing a complaint against a debtor. A statement must accompany the affidavit that says that the complaint was filed within the statute of limitations. Applicable creditors can modify their existing affidavit to comply with the new rule, as long as it includes the debt contract, relevant information on both parties, and a history of the debt.
  2. Same-Day Motions: Credit card companies and debt buyers will need to give prior notice before requesting a continuance or voluntary dismissal of a trial. This means that the court will no longer accept a plaintiff’s written or oral request to end or continue a trial if it is made on the day of the trial. Courts may require that applicable creditors file a motion to dismiss a trial at least five business days before the trial. As for a continuance, the court may accept a same-day request if both parties agree to it and the continuance would serve the interest of justice.
  3. Identity Theft Rules: A defendant may claim that he or she is not liable for a debt because he or she was the victim of identity theft. A new rule requires a debtor to file an identity theft affidavit. Once the affidavit is filed, the creditor will have 90 days to either dismiss the lawsuit or contest the affidavit. To contest the identity theft claim, the creditor must submit its own affidavit that gives factual evidence as to why the identity theft claim is false.

Effect on Creditors

The new rules largely favor debtors because they require creditors to make quicker decisions on how to proceed during their cases. Failing to comply with the rules could delay a judgment or lead to a dismissal. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can help you remain in compliance with court rules and obtain the judgment you need in your case. Schedule a consultation by calling 312-704-0771.

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