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.
Credit card debt plagues so many today. Even with the economic stimulus relief, some consumers are having to utilize credit cards to make ends meet. Escaping the load of credit card debt can seem like an impossible feat. Whenever someone offers a way out or credit card debt forgiveness, it can be easy to jump to accept the offer. The problem is credit card debt forgiveness can be more complicated than simply having the debt forgiven.
Not All Debt Forgiveness Strategies Are Equal
Credit card debt is forgiven usually from two strategies, namely debt settlement or bankruptcy. Many consumers try a third strategy, which involves ignoring the amount owed until the statute of limitations has passed for collecting on the debt. However, the damage that can result to the consumer’s credit score as a result of this failed strategy make it often not worth the wait.
Making the decision to file for bankruptcy can be a difficult one, but having the right bankruptcy attorney in your corner can make the process a seamless one. It helps to do your research, not only online but in person, too. The following tips can help someone who is considering filing for bankruptcy choose the best attorney for the job.
Experience Matters
Many people will start their search on the Internet, looking online to find a bankruptcy attorney. Experience is one factor that should always be considered when choosing an attorney. Experience does not just mean years practicing law. It is important to find someone who has filed cases in bankruptcy court and handles bankruptcy matters regularly. It helps a great deal to find someone who focuses his or her practice solely on bankruptcy law and who handles the specific type of bankruptcy the filer is pursuing instead of a general practice attorney who handles a little bit of everything. Many attorneys will handle only Chapter 7 bankruptcy cases, while others will handle corporate bankruptcies, restructuring and reorganization.
Credit card debt is a source of stress for many consumers. Once a large balance is accrued, the high interest rates can make credit cards nearly impossible to pay off. Whether you have been able to pay off your credit card debt or have had the debt discharged in bankruptcy, it is important to modify your financial behavior moving forward.
Monitor Your Credit Score
Consumers should monitor their credit reports on an annual basis to ensure that there are no inaccuracies. Once a credit card is paid off in full, that should reflect on the person’s credit report. Additionally, paying down a large sum of debt will have a positive effect on the consumer’s credit score. As the person’s credit score goes up, his or her chances of being approved for financing in the future also improves. After paying off debt, the consumer should check his or her credit report to ensure that this payment is reflected on his or her score. To make sure that the consumer’s credit score improves, periodic monitoring of his or her credit report should also occur.
Most American consumers carry some form of debt. In fact, debt has become a way of life for many Americans. Whenever a big purchase needs to be made, consumers will often apply for financing to pay for this purchase. This can include items like a home, car, furniture, or even for basic purchases.
According to data from the credit agency, Experian, as of 2019, the average American consumer has $90,460 in debt from various sources, including mortgages, student loan debt, personal loans and credit cards. Escaping this debt load can be tricky, and Experian’s data shows that certain generations struggle more than others when handling consumer debt.
The number of individuals and businesses seeking bankruptcy protection increased last month, while the coronavirus (COVID-19) pandemic continues. Financial experts have predicted this jump for months since states began to shut down in mid-March.
According to the legal-services firm, Epiq Systems Inc., the number of businesses that have filed for Chapter 11 bankruptcy increased by 52 percent when compared to July 2019. Additionally, the number of personal bankruptcy cases have gone up. The number of personal bankruptcy filings are expected to increase, when the Covid-19 economic stimulus relief is cut or reduced.
The total amount of household debt carried by American consumers increased by $601 billion in 2019, according to recent figures from the Federal Reserve. This increase represents the largest annual jump seen since before the 2007 financial crisis, according to officials at the New York Federal Reserve.
While total household debt has increased by $601 billion, the total amount outstanding has now reached $14 trillion for the first time. The last time the nation has seen national household debt grow this much was in 2007. At the time, household debt jumped by just over $1 trillion.
A disturbing number of student loan borrowers who began their repayment plans between 2010 and 2012 have made little to no progress towards reducing the principal balance owed on their student loans. According to a recent report from Moody’s Investor Services, 49 percent of student loan borrowers whose loan repayment plans began during that time have made no progress. Even worse, many of them have seen their balances grow.
This problem could be due to several factors, including poor job prospects and low salaries in their first jobs after graduation. Depending on the degree pursued by each borrower, it can be difficult, if not impossible, to find a viable job that will allow the borrower to make appropriate payments to pay down their student loan debt.
Bankruptcy offers consumers a fresh financial start, but many people hold off on filing bankruptcy for fear of the negative effect it will have on their credit. This is one of the most common bankruptcy myths, and can keep individuals who are drowning financially from filing for bankruptcy. Bouncing back after bankruptcy is possible, and with proper discipline, it can be done relatively quickly.
According to a recent study by LendingTree, 65 percent of people who filed for bankruptcy in 2017, had a credit score of 640 or higher in two years. The following tips can help you bounce back quickly after bankruptcy.
Before filing for bankruptcy, certain steps can be taken in advance to make the process go much smoother. No matter what financial situation a filer may be in prior to pursuing bankruptcy, it always helps to come up with a plan to protect his or her assets and make sure that the filer receives the highest level of debt relief possible. This planning can be done individually by the filer, but it is often best to sit down with a bankruptcy attorney to receive proper advice on what to do.
Stop Using Credit Cards.
One of the main reasons why many people end up filing for bankruptcy is due to credit card debt or other debt to pay for daily expenses. As soon as someone decides to file for bankruptcy, it is always recommended that he or she immediately ceases using their credit cards. Bankruptcy courts will view creating more debt when the person knows that it will never be repaid as a form of bankruptcy fraud.
