Debt Relief

Debt Relief: Understanding the Options and Consequences

Debt relief can ease the burden of overwhelming financial pressures. People with debt are more likely to face mental health issues, including prolonged stress, anxiety, and depression. To break free from the financial burden of debt, several different debt relief options are available for consumers. However, debt relief programs are not the right answer for everyone, and it is important to understand the implications, including both the positive and negative aspects of each form of debt relief before proceeding.

When to seek debt relief

Debt Relief

Make a Resolution to Eliminate Your Debt in the New Year

Some of the most common New Year’s resolutions involve improving one’s physical health through diet and exercise, cutting out bad habits, and losing weight.  Other popular New Year’s resolutions involve improving one’s financial health, getting finances in order, and eliminating debt.

Credit card debt, medical expenses, and the rising cost of living is weighing on many South Florida residents, causing more to fall behind on their monthly bills.

Credit Card Debt, Debt Relief, Medical Debt

Recent Study Reveals the Burden Debt Has on Mental Health

Carrying any amount of debt can be stressful, but carrying substantial amounts of debt can be debilitating to a consumer’s emotional well-being.  Debt can cause anxiety and depression, and the longer a person carries it, the more likely he or she will feel physical and emotional effects from it. A recent study highlighted just how severe the effects of insurmountable debt can be.

The data reviewed comes from the 2021 BC Consumer Debt Study released by BC Licensed Insolvency Trustees Sands & Associates. They surveyed over 1,700 consumers throughout British Columbia who declared personal bankruptcy or legally consolidated a debt.

The survey noted two specific trends regarding consumer debt. The largest proportion, approximately 32 percent, of people who responded to the survey said that they had had $25,000 to $49,999 of debt, not including mortgages or car loans.

Four out of five surveyed said they found that the main causes of their debt were completely outside of their control. For example, 18 percent reported that their debt grew to the amount it was due to them needing to rely on credit to pay for essential costs of living that their income could not cover. Additionally, others reported that their debt was caused by other issues outside of their control, such as illness or health-related problems, the breakdown of a marriage or relationship, and job-related issues.

Of the consumers surveyed, more than 56 percent of them said that credit card debt was their largest source of debt before they entered formal proceedings to eliminate their debts. Payday loans were the main source of debt for approximately six percent of those polled.

Individuals surveyed reported that being in such deep debt negatively affected their well-being. In terms of emotional well-being, 77 percent said their mental health suffered. Four out of five individuals said they constantly worried about being in debt. Three in four surveyed said debt caused them anxiety.

Even more concerning, one in six individuals surveyed said that the stress of carrying large amounts of debt resulted in them contemplating or thinking of suicide.

Mental health was not the only thing affected by debt. Fifty-three percent said that their physical health likewise suffered.

One major issue occurs when the consumer is not truly aware of how much he or she actually owes, resulting in the individual’s finances spiraling out of control. The stress that results from this debt can be debilitating to the person’s mental well-being. Approximately 68 percent reported that they concluded that debt was a major problem when it became a source of major stress in their lives. Sixty percent (60%) said they realized debt was a problem when they could only make minimum payments, while fifty percent (50%) said they realized debt was a major problem when their balances never went down from month to month. Unfortunately, at that point, their debt had grown to a figure that they could not control, forcing them into either bankruptcy or other sources of debt relief.

For more information, the full study can be accessed here.

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.

Debt Collection, Debt Relief

CFPB Announces Two Final Debt Collection Rules to Go into Effect November 30

The Consumer Financial Protection Bureau (CFPB) announced two final debt collection rules which are scheduled to take effect on November 30, 2021. These two rules clarify and add further detail to provisions of the Fair Debt Collection Practices Act (FDCPA), the law that offers protections to consumers from abusive or unfair collection practices from third-party debt collectors.

These rules were originally going to be made effective in the spring, but the CFPB delayed the effective date by 60 days to allow all affected parties time to comply due to the COVID-19 pandemic. However, after making the announcement regarding a 60-day delay, the CFPB determined that the extension was not needed and published the official notice in the Federal Register officially withdrawing the extension.

Debt in Divorce, Debt Relief

How Debt is Handled in Divorce

In a divorce, the married parties end up dividing assets accumulated during their marriage. Most people going through a divorce worry about dividing up their property and other assets. However, dividing up debt is just as important- if not more. This is of particular importance if the spouses do not have many assets.

A divorce judgment is where the court divides up the couple’s assets, as well as their debts. Part of this order involves determining which spouse is responsible for which debts. Normally, debts are divided equally between the parties, but that is not always the case when one spouse earns significantly more than the other or where one spouse is receiving more property that has debt connected to it than the other spouse.

Credit Card Debt, Debt Relief

How Much of Your Monthly Income Should go Towards Paying Down Debt?

Consumer debt. It seems to be an inevitable part of life for many Americans. In fact, most American consumers carry some level of debt. Getting out of it, however, is not so easy, which is why so many Americans use at least some portion of their income to pay towards their debt. Determining how much is appropriate can be complicated, depending on the consumer’s individual circumstances.

Generally speaking, it is important to pay more than the monthly minimum payment. A good rule of thumb is to follow the 50/30/20 rule. What this budgeting rule entails is the consumer spends 50 percent of monthly after-tax income or net income towards essential living expenses, such as mortgage payments, utility bills, food, and transportation costs. After that 50 percent is paid, the consumer allots the next 30 percent to his or her “wants,” meaning eating out, going on vacation, and other non-essential expenses. The remaining 20 percent is left for paying off debt or saving for the future.

Credit Card Debt, Debt Collection, Debt Relief

How Much Debt is Too Much? Here are the Warning Signs.

For many people the word ‘debt’ is a four letter word. A word that resonates a certain fear and anxiety, oftentimes associated with credit card bills and collection calls. However, taking on certain kinds of debt can serve as a means to an end. For example, borrowing money to go to college and earn a degree, starting a business, or purchasing a home or car.

Determining how much debt is too much debt can be tricky. If you have a good job, are in good health, and keep track of your finances, and interest rates, debt can be managed effectively. If used wisely, and for things that grow in value, like a home or education, it can be useful.

Debt Relief

What is Debt Relief and When Should I Seek It?

Debt can seem like an insurmountable burden, impossible to escape once a consumer has gotten too far in. Different options are available for dealing with credit card debt, student loan debt, and other consumer debts.  

Many times, consumers find themselves overwhelmed with several different types of debt in differing amounts.

Debt Collection, Debt Relief

Understanding Zombie Debt and the Statute of Limitations

Consumer debts have what is called a statute of limitations. This is the amount of time the creditor can use the court to force a consumer to pay a debt. After the statute of limitations has expired on a debt, it is no longer legally enforceable. Occasionally, however, a consumer may be contacted regarding an old debt by a collector who hopes the consumer will ‘restart the statute of limitations.’

Zombie debt is debt that the consumer thinks is “dead,” meaning it is past the statute of limitations that the debt collector is now trying to bring back to life. While the debt collector cannot take the consumer to court to collect on the debt, there are no laws saying they cannot continue to contact the consumer to collect what is owed. Many times, debt collection agencies will purchase expired debt to turn a profit. Since the cost to buy expired debt is exceptionally low, even if they collect on a handful of accounts, they are still earning a profit.

Consumer Bankruptcy, Debt Relief

Defaulting on Debt v. Filing Bankruptcy

It can be tempting to want to walk away from debt in lieu of filing for bankruptcy. But doing so will not provide the consumer with the clean slate that a bankruptcy discharge offers. It is often better to face these debts in a Chapter 7 or Chapter 13 bankruptcy case instead of choosing to default on them.

Whenever a consumer fails to make payments on a loan or financial obligation, this failure to pay is otherwise known as a default. Lenders all have their own requirements on what exactly qualifies as a “default,” including how many payments have been missed before the account is officially considered in default.