Consumer debt encompasses several different categories. However, many people often struggle with the same few categories, mainly student loans, medical debt, and credit card debt. It helps to know how to attack the debt individually in each category if a consumer is looking to pay down their various debts.
Student Loan Debt
If you are struggling with student loan debt, you’re not alone. In fact, it has been reported that Americans carry over $1.5 trillion in student loan debt. This figure amounts to an average individual load of $32,731 per student. If the consumer proceeds towards a master’s degree or professional degree following graduation from undergraduate studies, that amount can get into six figures. Paying down that debt can be a struggle for many, especially during recent times. Currently, the federal government has issued a forbearance on all federal student loan debt during the COVID-19 crisis, which has been extended past September 30.
If the borrower holds debt in several different loans, consolidating the loans into one payment can be helpful. However, keep in mind that you may lose the protection offered through the federal government if the borrower consolidates his or her federal loans through a private servicer. Putting all loans into one payment plan does make the process easier and can lock in a lower rate if student loan interest rates are expected to increase.
Borrowers do go through difficult times, as is evident through 2020, which is why certain options, including forbearance and deferment are available during that time. It is important to work directly with the loan provider if that type of assistance is needed. Before missing a payment, reach out and contact the loan provider first to see what type of assistance is available to get the borrower through a difficult period.
Credit Card Debt
Credit card debt is something many people struggle with today. As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges. If someone is going through a difficult financial time, it can be easy to rely solely on a credit card to pay for necessary expenses.
Before the consumer realizes it, the total amount owed can get out of hand very quickly. At that point, the individual may struggle to even make the minimum payments on a monthly basis. The worst thing a consumer can do is to allow the missed payment to happen and go into default on the card. It is always recommended the consumer reach out to the credit card company to see what can be done to help him or her through this time.
Certain short-term solutions may be available with the credit card company, including delaying a few payments or having the minimum monthly payment reduced. While these solutions will not help the person pay the card down in the long run, they can help in the short term.
Another category of debt that consumers tend to struggle with is medical debt. Even with health insurance coverage, medical costs can quickly add up and get out of hand. It is estimated that 17 percent of all consumers have past-due medical bills on their credit reports. One common mistake many make is to let a payment lapse without reaching out to the medical provider directly and working out a payment arrangement. Most providers are more than happy to negotiate the terms of payment and receive at least some type of payment instead of nothing at all. The problem is this help is not available until the consumer asks for it. Depending on the person’s circumstances, income-based plans or financial assistance may also be available to manage a high medical bill.
If the consumer struggles with making monthly payments on time, using a feature called automatic bill pay can help. Not only can missing a payment result in fees and penalties but it can negatively affect a person’s credit score. For certain, set expenses, it can help to make these payments automatic, meaning they come out of the person’s bank account on the same date every month until the debt is paid in full. The key is to make sure that enough money is in the person’s bank account so that the automatic payment does not result in an overdraft.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.