Bankruptcy Law

Understanding the Difference Between Exempt and Non-Exempt Property in Chapter 7 Bankruptcy

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Before filing for bankruptcy, many people fear losing their property during the process. Federal bankruptcy laws, as well as Florida bankruptcy laws, allow for certain property to be protected under what are known as bankruptcy exemptions. However, not all property is protected, and it is important for filers to be aware of the difference between exempt and non-exempt property in a bankruptcy case.  

When filing for Chapter 7 bankruptcy, the filer should expect for a significant portion of his or her property to be turned over to the court as part of the “bankruptcy estate.” The bankruptcy trustee will sell this non-exempt property to pay off the debtor’s creditors before a bankruptcy discharge is granted. 

COVID-19, Foreclosure Defense, Foreclosures

Bank of America, Chase and Wells Fargo Announce Plans Following Expiration of Mortgage Foreclosure Moratoriums

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As the stimulus programs put into place come to an end this year, many homeowners worry about what their futures will hold. Approximately 2.1 million homeowners are still utilizing these mortgage forbearance plans offered following the start of the pandemic, according to figures from the Mortgage Bankers Association, which means that many people are still set to be adversely affected once the moratoriums are lifted. 

Even more concerning, nearly 1.8 million families are not in forbearance on their mortgages but are at least 90 days delinquent on their mortgage accounts as of April 2021, according to data from Black Knight.   

Credit Card Debt

Credit Card Debt Drops a Staggering $56.5 Billion in First Quarter of 2021

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Credit card balances saw a record reduction during the first quarter of 2021, after a previous record-setting reduction year was seen in 2020.  According to a study published by the personal-finance website WalletHub, American consumers paid off $56.5 billion in credit card debt during the first quarter of 2021. 

WalletHub reported that American consumers paid off $82.1 billion in credit card debt in 2020, which is a significant accomplishment considering the challenges many people faced last year. However, this decrease in credit card balances does not necessarily mean that the credit card debt crisis has been solved. There is still a collectively $900 billion in outstanding credit card debt. The average household carries a balance of $7,519, and these figures are expected to rise. In fact, WalletHub is projecting consumers will add $60 billion to the nation’s total credit card balances.  

The quarter one decrease in credit card debt was 51 percent larger than the average credit balance paydown since the Great Recession.   

Certain U.S. cities did better than others in paying down credit card balances. Pembroke Pines, Florida, ranked number five on WalletHub’s list with an average household credit card debt of $16,549 and a total credit card debt of $948,650,144. Pembroke Pines citizens paid a total of $64,124,649 of this credit card debt with an average household balance paydown of $1,119.  

Fort Lauderdale came in 24th on the list of cities that did well in paying down their credit card balances. The average Fort Lauderdale household carried $14,400 in credit card debt with a total debt in the amount of $1,073,761,245. Of this amount, Fort Lauderdale residents paid down $72,581,618.  

Financial analysts believe that this data shows that U.S. consumers are in good financial shape in 2021. However, they do anticipate a $60 billion national increase by the end of the fourth quarter of 2021, considering the fact that COVID stimulus packages and additional unemployment benefits will phase out this year.  

As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges.  It is not surprising with the high interest rates, unreasonable fees, harassing debt collection calls, penalties and never-ending minimum payments that do not even make a dent in your actual debt.

Filing for bankruptcy is a viable option for those struggling with insurmountable credit card debt. Chapter 7 is the fastest form of consumer bankruptcy and forgives most unsecured debts like credit card debt, medical bills and personal loans.  There are certain qualifications a consumer must meet in regards to income, assets and expenses to file for Chapter 7 bankruptcy, which is determined by the bankruptcy means test.

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.   

 

Credit Card Debt

Which Debts Should You Pay First After Paying Off Your Credit Cards?

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Credit card debt is not the only type of consumer debt people struggle with. Once this debt is paid off in full, it helps to have a plan on which debts to tackle next.

According to data from the Federal Reserve and TransUnion, American consumers paid off a total of $82.9 billion in credit card debt in 2020. Credit card balances continued to drop by $49 billion in the first quarter of 2021, which is the second-largest quarterly balance decline seen since 1999. Despite this fact, more than 20 million American consumers have their student loan debts in forbearance.  

For the most part, financial advisors recommend that consumers pay down any debts they have that carry the highest interest rates, which is why credit cards are usually the first focus. With stimulus programs still in place, providing extra income to consumers temporarily, many financial advisors argue a different theory should be followed. 

Instead of focusing on the debt with the highest interest rate, consumers should look at all their debts and consider other options, such as refinancing other debt sources to lower their interest rates or modify payments. Refinancing could be a possibility for unsecured personal loans, as well as for mortgage debt.  With lower interest rates, consumers are encouraged to take advantage of this opportunity to save money and lower monthly payments, making it easier to pay off debts in full. 

Once credit card debt is paid off, many financial advisors recommend that consumers focus next on paying off their car loans. A car loses its value significantly as soon as it is driven, which is why so many consumers find themselves owing more on the car loan than the vehicle is worth. The interest rates of car loans tend to be moderate to high, although not always as high as credit card debt, depending on the consumer. Many times, it is advisable to either sell the car and use the proceeds to pay off what is owed on the loan or to refinance the loan.   

Once personal loans, credit card debt, and car loans are paid off by the consumer, it may then be advisable to pay off outstanding federal student loans. Since payments and interest is paused on federal student loans until September 30, 2021. During this time, any payment will go towards principal and not interest rate. Paying down this debt will only help improve the consumer’s credit score. 

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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.   

Medical Debt

COVID-19 Pandemic Leads to Medical Debt Crisis

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Medical debt is a financial stressor for many Americans, even before the COVID-19 pandemic. Now with the pandemic well into its second year, countless Americans are becoming overwhelmed with medical bills with no end in sight. 

Scientists are studying the long-term effects of COVID-19 on those who contract the virus. Many of them have suffered through several hospital stays, multiple treatments, and several referrals to various specialists. Each of these events, of course, comes with its own set of medical bills. 

According to Credit Karma, medical debt spiked 6.5 percent since the pandemic first hit at the start of 2020, increasing by approximately $2.8 billion. The number of individuals with past due medical debt increased by nine percent during this time, jumping from 19.6 million to 21.4 million.   

Another medical debt survey conducted by Lending Tree found that 60 percent of Americans polled carried some level of medical debt. Fifty-three percent (53%) of them saying that this debt was more than $5,000. Of those surveyed, 72 percent surveyed said that their medical debt has kept them from purchasing a home or having a child in the near future.    

Many consumers have felt forced to rely on credit to pay off their outstanding medical debts caused by a COVID diagnosis. However, paying these debts via credit card only delays payment of what is owed.  

The COVID-19 pandemic has hit consumers and businesses hard. According to a study conducted by the Commonwealth Fund, the Employee Benefit Research Institute, and the W.E. Upton Institute, 7.7 million American workers lost their employee-sponsored health insurance benefits by June 2020, affecting not just the 7.7 million workers but also their 6.9 million dependents. Due to the loss of this insurance coverage, overall cost of medical care has skyrocketed. On top of losing that health insurance coverage, many Americans also lost their job and thus their income source, making paying these high costs nearly impossible.  

Congress passed the $1.9 trillion American Rescue Plan to offset these high medical costs. The bill’s protections provide a short-term solution for those struggling with medical debt. Democratic lawmakers are pushing heavily towards expanding health care and addressing the costs of medical treatment. Some of these efforts have been to reduce the negative effects medical debt has on a person’s credit score. 

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Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney 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, P.A. 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, P.A. website at www.miamibankruptcy.com.

student loan debt, Student Loans

Do Student Loans Have a Statute of Limitations?

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When it comes to most debts, any time the individual who owes the debt stops making payments, the debt will then go into collections. At that point, the original creditor can make the decision to sue the person owing the debt for the remaining balance. However, the creditor only has so long to file that lawsuit. Like any other cause of action, a statute of limitations places restrictions on how long the creditor has to pursue collection of what is owed.  

Each state has its own statutes of limitations, but when it comes to federal student loan debt, federal law governs how this debt is collected. Federal student loans are not governed by the same rules as most consumer debts. In fact, federal student loans do not have a statute of limitations at all, no matter how old they may be.  

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.