Consumer Bankruptcy, Debt Relief

Defaulting on Debt v. Filing Bankruptcy

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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.

Debt Relief, Tax Debt

Three Cost-Effective Ways to Pay Off Tax Debt

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With tax season coming to an end, many consumers are wondering how they are going to pay their outstanding tax bill. When it comes to tax debt, it is best to pay it off as quickly as possible and in one lump sum payment. However, payment in full is not always possible. Fortunately, there are options available for those struggling with tax debt. 

The official tax filing deadline was May 17, and all outstanding 2020 tax bills were technically due at that time. If a taxpayer was not able to pay the bill by this date, interest and penalties will begin accruing on the outstanding amount owed.   The penalty for not paying tax bills in full is 0.5 percent of the unpaid amount monthly until the full amount is paid. On top of interest, penalties will add up to 25 percent of the total amount owed. Because of these penalties, the quicker the tax bill can be paid, the better.  

Bankruptcy Law, Consumer Bankruptcy

Steps to File for Bankruptcy in 2021

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Bankruptcy is an important tool, that allows consumers to obtain a fresh financial start. For many, the concept of bankruptcy is unfamiliar, and understanding the steps needed to file for bankruptcy is important in fully understanding the process.  

Choosing a Chapter 

The first step is determining which type of bankruptcy to pursue. Bankruptcy is not a one-size-fits-all type of situation. Choosing the right type of bankruptcy hinges a great deal on the individual’s specific circumstances. The most common two categories used by consumers are Chapter 7 and Chapter 13 bankruptcy. For filers who fall under a certain level of income and can pass the mean test, meaning they earn less than Florida’s median income, Chapter 7 bankruptcy is the best selection for them.  Alternatively, if a consumer earns too much to qualify for Chapter 7, a Chapter 13 reorganization bankruptcy may be the best avenue for him or her.  

Credit Card Debt

Should I Contribute to my 401K or Pay Off Credit Card Debt?

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Credit card debt is a burden that many consumers struggle with. Without a large influx of cash, it can be difficult to pay off outstanding credit card bills. Many consumers also struggle with deciding whether they should focus first on paying these debts off or whether they should be taking any extra funds and saving for retirement in a 401(k) or similar plan.  

Paying Off Credit Card Debt

Credit cards come with high interest rates, which can make paying the balance off impossible. The larger the balance gets, the harder it can be to pay down, which is why it can often be a good idea to focus on paying this debt down first. Additionally, paying down the credit card balance to zero will also noticeably improve the consumer’s credit score. A better credit score will eventually benefit him or her for when it comes time to make a big purchase, such as a car or a home. It will also eliminate the monthly payment from the consumer’s budget, allowing him or her the chance to save for the future, including retirement.  

Bankruptcy Law, Consumer Bankruptcy

Will Filing Chapter 7 Bankruptcy Prevent Vehicle Repossession?

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When someone is behind on his or her car payments, a Chapter 7 bankruptcy case may allow him or her to catch up on these missed car payments, saving the vehicle from repossession. The ability to do this depends on how far behind the borrower is on his or her payments and whether the loan is already in default.   

While a Chapter 7 bankruptcy case will not permanently prevent the person’s vehicle from ever being repossessed, it can provide the borrower a chance to catch up on missed payments or negotiate with the lender before the loan goes into default.  

Bankruptcy Law, Consumer Bankruptcy

The Cost of Filing Bankruptcy in 2021

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Filing for bankruptcy comes with its own set of costs. It may seem counterintuitive that a person who is having difficulty paying his or her bills can pay extra costs to receive relief from his or her financial obligations. However, just because someone is not able to pay his or her bills should not prevent them from hiring an attorney to file their bankruptcy case. While “do it yourself” projects may be a good idea around the house, there are reasons to let a professional handle your bankruptcy filing.

Consumer Bankruptcy, COVID-19

Personal Bankruptcy Filings Drop in Light of COVID-19 Pandemic Relief

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Personal bankruptcy filings are down, leaving many financial analysts questioning whether the drop in filings can be attributed to financial relief offered from governmental pandemic relief programs or to other economic factors. This stimulus relief offered consumers a much-needed financial boost, but the question remains how long this boost will hold off future bankruptcy filings. 

Debt Collection, Debt Relief

Predatory Debt Collectors Barred from PPP Loans Under New Bill

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New legislation introduced this week will effectively bar all predatory debt collectors from receiving money from funds received under the federal government’s Paycheck Protection Program (PPP).  

The measure has been introduced by Representatives Suzanne Bonamici (D-Ore.) and Marie Newman (D-Ill.). In announcing the proposed legislation, the lawmakers pointed to an analysis conducted by the Washington Post in January 2021. The Post reported several incidents where debt collection companies had harassed consumers for payment on debts after they had received their own financial assistance from federal PPP loans. It was their hope that this legislation will curb these practices and will effectively block predatory debt collection firms from receiving PPP money themselves.  

Consumer Bankruptcy, Coronavirus, COVID-19, Small Business Bankruptcy

U.S. Bankruptcy Filings Drop 38 Percent

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Bankruptcy filings are on the decline, according to a recent report.  Statistics released by the Administrative Office of the U.S. Courts, reveal bankruptcy filings dropped 38.1 percent for the 12-month period ending March 31, 2021. This dramatic drop in filings coincides with the COVID-19 pandemic, which first disrupted the economy in March 2020.

Bankruptcy filings fell for both personal and business bankruptcies. Non-business filings fell by a total of 38.8 percent, while business filings fell 13.9 percent.

student loan debt, Student Loans

What $10,000 in Student Loan Cancellation Would Look Like

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Lawmakers have been calling upon President Biden to move forward with an executive order that would cancel up to $50,000 in federally backed student loan debt. Other amounts have been considered, the lowest amount being $10,000. How this cancellation would look across the country would vary, however, depending on the state and the borrower.  

According to the Student Loan Hero, $10,000 in student loan forgiveness would cost approximately $315 billion. This amount of loan forgiveness would erase outstanding student loan balances for 34 percent of all student loan borrowers, according to their review of Department of Education data.