Tag: credit card debt

Bankruptcy Law, Credit Card Debt, Debt Relief, student loan debt

Good Debt vs. Bad Debt: Do You Know the Difference?

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When it comes to debt, not all debt is created equal. If the money being borrowed helps increase the borrower’s net worth or income, that debt is considered “good” debt, while bad debt only worsens a person’s financial situation.

Good Debt

Good debt is any obligation that would increase a person’s net worth or income. While it does involve a financial obligation to repay a debt, it can also be something positive or beneficial to the consumer.  Good debt also tends to come with a lower interest rate on the amount owed. Mortgages are one example of good debt because the person who takes out the loan ends up with an asset that will increase his or her net worth. Car loans are also considered good debt since they are attached to an asset, namely a car. Student loans are another type of debt that are considered good debt, especially when it comes to obtaining a desired degree and furthering job prospects and earning power for the borrower. These loans may not be attached directly to an asset, but they tend to have lower interest rates, especially if the loans are federal student loans.

Credit Card Debt, Debt Relief, student loan debt, Timothy Kingcade Posts

The Effects Student Loan Debt and Credit Card Debt have on U.S. Economic Growth

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The fact that many Americans are struggling to pay their student loans and credit card debt is not just effecting the individuals carrying the debt. It is taking a toll on the economy, as well. In fact, these two growing categories of debt are reportedly weighing down U.S. economic growth.

Credit card balances are at an all-time high at $868 billion in the second quarter, which is up from $848 billion reported in the previous three months, according to the Federal Reserve Bank of New York. Consumer debt is also climbing, hitting an all-time high of $13.86 trillion in the second financial quarter. When compared with the previous high of $12.68 trillion just before the 2008 recession, financial experts have expressed concern as to what this could mean for the country’s financial well-being.

Bankruptcy Law, Credit Card Debt, Debt Relief

Bankruptcy Filings on the Rise Across the Country

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The number of bankruptcy filings are on the rise across the country, signaling that Americans are struggling to keep up with their debt.  The majority of the bankruptcy filings are in larger cities, where personal incomes are oftentimes not enough to pay household bills and daily living expenses.

According to the American Bankruptcy Institute (ABI), U.S. bankruptcy filings jumped by three percent in July 2019 from July 2018. A total of 64,283 filings were reported for July 2019, which is up from the 62,241 reported in July 2018. If this trend continues, the number of bankruptcies filed this year is anticipated to hit 796,000, which is more than the 777,000 reported last year.

Bankruptcy Law, Credit Card Debt, Debt Relief

How to Stop Harassment for Debts You Do Not Owe

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Debt collectors will do just about anything to get a consumer to pay on a debt, their job depends on it.  This can even include the collection of old debts that are past the statute of limitations. According to recent figures from the Consumer Financial Protection Bureau (CFPB), in conjunction with a complaint database through consumer advocacy group, U.S. PIRG Education Fund, 44 percent of all complaints against debt collectors have to do with attempts to collect on a debt that is not even owed by the person receiving the call.

The problem is many consumers are not aware that they do not owe on the debt, and they are not fully aware of their legal rights when it comes to debt collections. Under the Fair Debt Collection Practices Act (FDCPA), third-party debt collectors are limited in how many times a day they can call consumers, as well as the type of communication and language they may use while collecting on the debt. If the communication constitutes harassment, the consumer has the right to ask the debt collector to stop contacting him or her, and file a lawsuit against the collection agency.

Credit Card Debt, Debt Relief

How to Protect Your Wages from Credit Card Companies

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A credit card company can garnish a person’s wages following a successful judgment, which is why it is important to not ignore collection attempts. While it can be hard to fight wage garnishment after it is entered, consumers do have options to protect themselves in the event this does occur.

Settling the Debt

One of the best ways to avoid a wage garnishment is to work directly with the credit card company or debt collector. Many times, the company may be willing to work with the consumer rather than go through the effort and spend the legal fees to take them to court.

They may require the consumer provide some type of proof that his or her financial situation is solid enough to handle the settlement amount. If the debt is large, they may require some type of security to ensure payment will occur.

Credit Card Debt, Debt Relief

When Can a Credit Card Company Garnish Your Wages?

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When someone is facing a credit card collection action, the last thing that person wants is to have his or her wages garnished by the credit card company. However, credit card companies do have the right to garnish a cardholder’s wages, just like any other creditor.

Before credit card debt can be collected, it must be considered delinquent.  At the time a person gets a credit card, he or she enters into an agreement to make monthly payments. If these payments are not made on time, that contract is considered broken and the debt delinquent. Once this happens, the credit card company is within its right to collect on the debt. Normally, missing a credit card payment results in a significant interest rate hike, but if the debt goes unpaid for too long, the credit card company can file a legal action to collection on the debt.

This step is where garnishment comes into play. Credit card companies cannot garnish the cardholder’s wages without first filing a legal complaint to collect on the debt and serving the complaint on the cardholder. The accountholder has a chance to respond to the complaint and file an answer within a set period of time. If he or she does not respond, the credit card company can obtain a default judgment against the cardholder, speeding up the process. However, if the cardholder does respond, the credit card company must prove that the debt is owed at a hearing before a judge.

Credit Card Debt

More Than One-Third of College Students Already Have Credit Card Debt

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A significant number of college students report that they have accumulated credit card debt while attending school. According to a recent report from AIG and EVERFI, 36 percent of all college students have a credit card with a balance of over $1,000 on it. This is on top of the student loan debt they are carrying.

Many of these students are using credit cards to pay for groceries, books, or entertainment expenses. Of students surveyed, some say they choose to use their credit cards over debit cards for the benefits the cards include, such as travel miles. These students are following a nationwide trend when it comes to using credit cards to pay for everyday expenses. A recent survey showed that 23 percent of Americans use their credit cards for necessities, including rent, food, and utilities.

However, problems arise when these cardholders are not able to pay down the balance every month. The situations can get even worse if the cardholder falls behind on payments, pushing the accounts into delinquency. The Federal Reserve Bank of New York reported that more than eight percent of balances held by young cardholders between the age of 18 to 29 were seriously delinquent. Being seriously delinquent means that the accounts are at least 90 days overdue with no payment made.

The EVERFI and AIG survey found that 15 percent of college students took a hit on their credit scores because of being behind on their credit card payments. Missing a credit card payment will not only cause the card’s interest rate to skyrocket, but it will also seriously affect that person’s credit score. The higher the interest rate is, the harder it is for the person to pay off the card over time.

It can be a definite struggle for the student to handle both a credit card and student loan payment after graduation. Students should put together a plan to pay off the credit card debt as quickly as possible by setting a deadline and a goal on how quickly the person can handle paying off the card. The plan only works if the student does not continue spending on the card and makes more than the minimum monthly payment on the card.

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, and never-ending minimum payments that do not even make a dent in your actual debt. We offer additional tips for eliminating credit card debt on our blog.

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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.

 

Bankruptcy Law, Debt Relief, student loan debt, Student Loans

Possible Solutions to the Student Loan Debt Crisis

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With more than $1.5 trillion in student loan debt owed nationwide, it can be safe to say that the student loan crisis has reached a breaking point. For lawmakers, one solution to bring change to this problem is allowing student loan debt to be discharged in bankruptcy court.

Another measure that has received a great deal of public support is Senator Elizabeth Warren’s proposal to completely wipe out the majority of America’s student loan debt through a loan forgiveness program. Her proposal has received support from other presidential hopefuls, including Senators Bernie Sanders, Kamala Harris, and Amy Klobuchar, as well as Representative Eric Swallwell, all of whom are co-sponsoring it.

Recently, the American Bankruptcy Institute’s recommendations to allow student loan debt to be discharged in bankruptcy were published.

The average college student graduates with about $30,000 in student loans. This number does not include those students who pursue a master’s or post-graduate degree. Many of those students end up owing six figures in student loan debt.

The burden these loans present to young graduates is intense and can even follow them into retirement. Outstanding student loan debt can affect a person’s job in 13 states. To keep up with loan payments, many borrowers have accumulated credit card debt, just to be able to afford basic living expenses.

Student loans, while not impossible to discharge in bankruptcy, are extremely difficult to eliminate in a Chapter 7 or Chapter 13 bankruptcy case. Other obligations may be eliminated at the end of the case, but the student loan ones will stay with the borrower even after other obligations are discharged.

Bankruptcy courts use the “undue hardship” test to determine whether a filer should have his or her student loan debt discharged, but no set standard has ever been made on what qualifies as an undue hardship, making it very difficult to ever receive relief. New bi-partisan legislation has been introduced and proposes regulations that ensure student loan debt is treated like other forms of consumer debt in bankruptcy, meaning it can be easier to discharge.

Without the ability to discharge the largest amount of debt many bankruptcy filers are carrying; these individuals will never be able to receive the fresh start bankruptcy is meant to give them. While this change may not completely solve the student loan crisis, many financial experts are hopeful it can be a catalyst for change.

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For borrowers who are struggling with student loan debt, relief options are available.  Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt.  It is important you contact an experienced Miami bankruptcy attorney who can advise you of all 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, Debt Relief

25 Percent of Americans Going into Debt Paying for Daily Living Expenses

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More Americans are struggling to pay for their daily expenses and are using credit cards to pay for basic necessities, according to a recent report by Experian. This reliance on credit cards to pay for necessary living expenses puts consumers even deeper into debt. In fact, the report showed that American consumers carry an average of $6,506 in credit card debt.

Approximately 23 percent of those surveyed said that they struggled with paying for their most basic necessities, including rent, food, and utilities, and had to pay for these expenses with their credit cards. Of those consumers surveyed, 12 percent of them reported paying for medical bills with their credit cards.

It has been reported that the middle-class cost of living is now 30 percent more expensive than it was 20 years ago. The costs for essentially everything has increased over the years. According to the Economic Hardship Reporting Project, the cost of tuition at public universities and housing prices have quadrupled between 1996 and 2016.

Not only has the cost of living increased, but the amount of money Americans have in savings has decreased remarkably. A majority of American consumers say they have less than $1,000 in savings. Additionally, 70 percent of them report that they would not be able to get by if their paycheck was delayed by a week, which has many financial experts concerned.

Not all Americans are using their credit cards to pay for daily expenses, however. Many say that their discretionary spending on non-essential items, including entertainment, travel, and clothing, has led to their credit card balances. It is reported that Americans spend an average of $483 a month on eating out, entertainment, and travel, according to Schwab’s 2019 Modern Wealth report.

The average credit card APR is at an all-time high of 17.73 percent, according to CreditCards.com, which makes paying off large credit card balances, very difficult. With an average balance of $6,354, consumers could potentially be paying on these cards for years, if not decades. In fact, if someone has a credit card balance at this national average with a credit card that charges the average APR, he or she could be paying the minimum payment on that card for over 17 years before it is paid off in full. This scenario only works if the consumer stops using the card and does not add any new charges to the outstanding balance.

People living in the Miami metro area, which includes both Fort Lauderdale and West Palm Beach, carry the second-highest credit card debt balances in the country.  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. We offer additional tips for eliminating credit card debt on our blog.

Click here to read more on this story.

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.

 

Bankruptcy Law, Credit Card Debt, Debt Relief

Debt Consolidation vs. Bankruptcy: The Pros and Cons

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If someone is struggling with large amounts of debt, they may be weighing their options between debt consolidation and bankruptcy. There are positives and negatives to both- but ultimately, it depends on a person’s specific financial situation and life circumstance as to which choice is the right one for him or her.

What is Debt Consolidation?

Debt consolidation involves combining a person’s older debt from various sources into one new debt. This consolidation could be done by taking an unsecured personal loan to pay for the total amount owed or by transferring balances from multiple credit cards into one credit card.

Debt consolidation involves making payment to one lender, oftentimes at a lower interest rate.  These are two of its appealing factors.  However, we can tell you that debt consolidation rarely provides a long-term solution.  Our attorneys have helped many clients who were promised one result from a debt consolidation company only to receive far less, and stuck with the remaining debt.

Here are some of the disadvantages of debt consolidation.  

  • The debt cycle continues: While this option allows the consumer to consolidate multiple sources of debt, it only pays off that debt to combine it into one larger balance. Many consumers make the mistake of utilizing debt consolidation only to continue the cycle of debt.
  • Delaying the inevitable: Debt consolidation is oftentimes used as a ‘temporary’ fix, only delaying the inevitable. If a person is struggling to pay off various forms of debt, particularly if that debt is medical debt, credit card debt or personal loans- bankruptcy might be a better option, as the consumer would receive a complete discharge of these debts.

Choosing Bankruptcy as an Option.

Depending on an individual’s income and amount of debt, pursuing a Chapter 7 bankruptcy case may be the wisest option to discharge the debt or a Chapter 13 bankruptcy case to reorganize and pay down qualifying debt. One factor to keep in mind is debt consolidation is a big business. It can be successful for some people, but for others, it may not provide the long-term solution the consumer needs.  The attorneys at Kingcade Garcia McMaken have helped thousands of people restart, rebuilt and recover through bankruptcy.

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.

Related Resources:

https://studentloanhero.com/featured/debt-consolidation-vs-bankruptcy/