Some of the most common New Year’s resolutions involve losing weight, improving one’s health, learning a new skill or hobby, and getting organized. Another common New Year’s resolution is paying down debt and improving one’s financial health, whether that means creating and sticking to a budget or getting out of debt completely.
Here are some tips to help you keep your New Year’s debt resolutions:
Student loan debt has reached an all-time high in this country with an estimated $1.6 trillion owed nationwide. Student loan debt is a major issue being discussed in the 2020 presidential race, and it is also an issue being addressed in the current legislative session. The U.S. Department of Education is also considering changes for student lending. No matter how you look at it, major changes are coming in 2020 for student loan borrowers.
These changes come at the height of the student loan debt crisis. According to a recent study from Politico/Morning Consult, more than half of American consumers consider student loan debt to be a major problem facing the country. In fact, student loan debt has now surpassed both credit card and auto debt. With the average college graduate walking away with $30,000 in student loans, which is up from $10,000 in the 1990s.
This past year was not a profitable one for a number of U.S. businesses and retailers, resulting in many of them filing for bankruptcy in 2019. These businesses ranged from brick-and-mortar companies to online stores, and by the end of the year, more than 7,000 stores closed nationwide. Some of the well-known ones include:
Barneys New York
The luxury department store filed for bankruptcy in August 2019, which came as a surprise to many since the business has been running for a century and has survived many financial ups and downs. However, after filing for bankruptcy this summer, the company was purchased by Authentic Brands Group, a company that also owns Nine West. Authentic Brands will be licensing the Barneys New York product to Sakes Fifth Avenue, and B. Riley Financial has also purchased remaining company assets in November 2019. B. Riley intends to take Barneys’ luxury products and sell them at much lower price points through private sales.
Purchasing a vehicle is oftentimes a necessary expenditure. A vehicle is needed to get to and from work or driving to school, but for many Americans, buying a car means taking on a large amount of debt. As they trade in their current vehicles for a newer model, many are resorting to taking the unpaid balance on the car loan and rolling it into a new debt. The result is the person will often have a vehicle that is worth much less than what is owed on it.
This negative equity and is also referred to as being underwater on the vehicle. It is reported that during the first nine months of 2019, approximately 33 percent of consumers who traded their vehicles in to buy new ones had negative equity. Five years ago, this percentage was 28 percent, and it was only at 19 percent ten years ago. The average debt owed on these cars as they were being traded in is around $5,000 while the average amount was $4,000 five years ago.
With the cost of medical care increasing every year, many Americans are struggling to pay their medical bills. According to a recent study from NerdWallet, medical costs have increased 33 percent since 2009, while the national median household income has only increased 30 percent. To keep up with these costs, many consumers are forced to pay for their medical bills with credit cards. The problem is credit card interest rates can range anywhere from 10%-30% and come with additional fees and costs if timely payment is not made. Medical bills are expensive and paying them with your credit card will only add unnecessary interest fees to your bills.
Here are some tips that can help you avoid having to put medical bills on a credit card.
When filing for bankruptcy, certain factors should be kept in mind, including the type of bankruptcy being filed, property exemptions available to the filer, and the various laws and legal regulations that accompany filing for bankruptcy.
The type of bankruptcy being filed.
The most common types of consumer bankruptcy are Chapter 7 and Chapter 13 bankruptcies. A Chapter 7 bankruptcy allows filers to receive a total discharge of their qualifying debts and is an option used mostly by filers whose debts are particularly high compared to their level of income. To file for Chapter 7 bankruptcy, filers must qualify under the bankruptcy means test. Chapter 13 bankruptcy allows the consumer to enter a repayment plan to pay all or part of his or her debts over the course of three to five years.
When it comes to monitoring a credit score, it is important to pay all bills on time and not max out a credit card when relying on one for holiday spending. However, another factor, known as the credit utilization ratio, plays a major role in a consumer’s FICO score. In fact, this number accounts for 30 percent of the average consumer’s FICO score, and it is the second most important part of a person’s credit score next to paying bills on time.
To figure out what this score is, the consumer needs to add up credit limits across all his or her credit cards and then add up the outstanding balance on each card. Divide the total balance owed by the total limits and multiply that by 100 to determine the percentage or credit utilization ratio.
When most people think of their retirement, they picture living a life of rest and relaxation. However, with credit card debt increasing for individuals over the age of 65, many are carrying this debt into retirement. Medical debt can compound the problem. When seniors face health issues, putting the additional out of pocket costs not covered by their insurance can be tempting. In fact, medical debt is the leading cause behind U.S. bankruptcy filings today.
Most senior citizens rely on a fixed income following retirement, whether it be money coming in from social security or retirement savings. This income could very well be enough to keep that person living a comfortable life. However, it only takes one major medical crisis or unexpected expense to turn a comfortable financial situation upside down. For seniors living on a fixed income, it can force them to put these unexpected expenses on credit cards.
In life, honesty is always the best policy, but not when it comes to communicating with a debt collector. In fact, it is best to use caution when making any statements to a debt collector, as they could be recorded and used against a person later. By no means should the consumer lie to the debt collector, but he or she should at least use reasonable care when talking with someone who is collecting a debt.
It is important to be aware of the tactics that many debt collectors will use to get you to pay on a debt. They often will resort to scare tactics or bullying to put the individual in fear of losing his or her home or livelihood if he or she does not pay on the debt. One key piece of advice is to know that all consumers have rights under the Fair Debt Collection Practices Act (FDCPA).
Bankruptcy laws require that the filer be honest and open about his or her financial situation, including disclosing all assets and debts. While no one wants to lose property to pay off creditors, some assets must be sold during the bankruptcy case to pay off the filer’s debts. If a filer actively tries to hide or fails to disclose information in hopes of keeping it from the bankruptcy court, this is called bankruptcy fraud and it can cause your case to be dismissed.
Hiding Assets
Concealing assets is one of the more common forms of bankruptcy fraud. Approximately 70 percent of all cases where some type of fraud was reported involved concealment of assets. It can involve the person simply leaving a certain asset off the list of those reported to the bankruptcy trustee. It can also involve hiding the asset through a fraudulent transfer, including giving the asset to someone else to keep it during the duration of the bankruptcy case, with the intent that the person holding the asset will return it after the case concludes. If this type of fraud is discovered, the filer and the person holding the asset could be held liable for bankruptcy fraud.
