Consumer Bankruptcy, Debt Collection

Should I Hire a Debt Relief Agency to Avoid Bankruptcy?

Consumers often resort to seeking the assistance of a debt relief company in an effort to avoid filing bankruptcy. However, hiring a third-party debt relief company is not always a wise decision for the consumer if bankruptcy is inevitable.

Some consumers decide to retain the services of a debt settlement company to negotiate payments on their outstanding debts. However, often the better option ends up being either having the consumer directly settle his or her debts without hiring another company or having the consumer move forward with filing for bankruptcy.

Debt settlement companies say they can work directly with the consumer’s creditors to settle their outstanding unsecured debts. In order to accomplish this, most debt settlement companies tell their clients to stop making payments on their debts, thereby pushing the debts into collections. The debt settlement company will then tell the consumer to pay them a monthly fee, which will be set aside into a savings account for future settlement of the person’s debts.

Unfortunately, there are many things a debt settlement company fails to tell the consumer when they are hired to negotiate the consumer’s debts. Ultimately, debt settlement is a business, and the company is looking out for their bottom line, not the consumer’s best interest, which is why so many debt relief scams exist.

First, while the debt settlement company is working on the consumer’s behalf, the total amount of debt will continue to grow thanks to interest accruing and fees being assessed when the consumer stops making payments. The consumer will also find his or her credit score taking a significant hit during this time since defaulting on a financial obligation is reflected poorly on someone’s credit report. Additionally, the creditor is under no obligation to work with the debt settlement company. They may be successful in settling a debt, the creditor is not obligated to take a settlement offer just because one is made. The creditor is always within their rights to pursue the full amount owed.

The consumer’s credit score will definitely be impacted by debt settlement. Essentially, entering debt settlement is an admission of the consumer not paying his or her debts as originally agreed. Additionally, the debt settlement will stay on the consumer’s credit report for seven years.

Ironically, debt settlement can also leave the consumer in an even worse situation than when he or she started, especially if the efforts to negotiate the debts are unsuccessful. For many consumers, going through debt settlement is essentially delaying the inevitable filing for bankruptcy. It is usually best for the consumer to first sit down with a bankruptcy attorney and analyze his or her situation to see which route is the best one to take.

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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.

Credit Card Debt

How Your Credit Card Debt Can Hurt Your Retirement Savings

Credit card debt presents a challenge for many Americans. This type of debt comes with higher interest rates and lack any potential tax benefits. Credit card debt should essentially ‘retire’ before you do, because it can eat into your savings and reduce your standard of living.

While paying down debt is important, saving for retirement should not be overlooked. Many times, consumers want to focus all their efforts on paying down outstanding debts, saying that they will start saving for retirement once they conquer their debts. By doing this, however, the consumer misses out on the returns that could be made on any money invested in his or her 20s and 30s. For example, if the consumer begins saving $200 a month, starting at age 20, he or she would likely have around $550,000 to $600,000 saved at an annual return rate of 6.5 percent. If he or she waited until he or she was 25 to save, that person would only end up with $435,000 at retirement.

The problem with credit card debt is the high interest rates, which can make paying a large balance off extremely difficult. Often, consumers will only end up paying the minimum amount owed from month-to-month, which only covers the interest that accrued from the prior month. This method not only prolongs paying off the credit card, but it also delays being able to set aside any money for savings for the future. For someone with a credit card balance of $6,300, carrying an interest rate of 17 percent, paying the minimum payments alone could mean it will take the individual 18 years to fully pay off the card.

The key is to learn how to do a combination of both, saving for retirement and putting enough money towards paying down debts. Not all consumers are able to pay balances off in full, but they should at least make more than the minimum monthly amount owed. Any additional amount will help towards paying down the principal. At the same time, any amount the consumer is able to put away towards retirement savings helps, even if the amount seems small. Savings of any amount is better than the alternative of not saving at all. As more and more debts are paid off, the consumer can take what he or she was using towards outstanding debt and put that amount towards retirement savings. Any amount of progress is better than no progress at all.

How are retirement accounts protected in bankruptcy?

The Federal Bankruptcy Code and Florida bankruptcy exemptions extend protection to various types of individual retirement accounts (IRAs) during a bankruptcy. This protection was solidified in 2005 with President George W. Bush signing the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) into law.

Traditional IRAs and Roth IRAs are protected up to $1 million in value. The precise amount protected is currently $1,362,800. Adjustments are made every three years for inflation with the next one anticipated in 2022. The BAPCPA also states that bankruptcy courts have the discretion to extend additional protection to cover more than the amount allowed under the exemption.

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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.

student loan debt, Student Loans

Uncertainty Surrounding Debt Relief Leads to Increased Student Loan Scams

Many student loan borrowers seeking relief from their student debt burden prior to payments resuming in 2022 have found themselves on the receiving end of student loan scams. In fact, a number of consumer protection firms across the U.S. have issued warnings regarding the increase of certain student loan debt relief scams.  It is important that all consumers are aware of what red flags to look for when being offered financial assistance towards their student loan debt.

Borrowers were given some relief during the COVID-19 pandemic with federal student loan repayments being paused since March 2020, along with federal student loan interest being halted during this time. However, federal student loan payments are scheduled to resume in February 2022, meaning that millions of borrowers will be required to pay on their student loan debt for the first time in over a year. This fact has many borrowers panicking and trying to figure out how to either continue paying on their debt or find relief wherever they can find it.

Student loan relief scams are nothing new. In 2021, the Federal Trade Commission (FTC) issued millions of dollars in refunds to individuals who fell victim to student debt scams. As of 2017, it is estimated that $95 million has been paid to student loan fraud victims. As a result, financial experts predict that even more fraud reports will be coming in 2022.

One of the biggest warning signs borrowers should look for when communicating with an entity claiming to provide debt relief to student loan borrowers is when the person on the other end of the phone requests the caller’s student loan login information or his or her Social Security number. While their request may seem legitimate, providing this information could open the consumer up to having their student loan accounts hacked, also allowing the scammer to create falsified documents with this information and defraud the consumer even further.

The information being requested is often referred to as personal identifiable information or PII, and it can include the consumer’s Social Security number, driver’s license number, banking information, and credit card numbers. Providing this information allows the scammer to hack the consumer’s identity.

Another sign of a scam occurs when the alleged debt relief company requests money up front before providing a service. If a company is requesting the person pay a fee before even beginning the process of negotiating on a debt, this is a major red flag that indicates the company may not be legitimate.

Additionally, if the student loan debt relief company advertises their services on social media or reaches out to the consumer directly through cold calling, this could be another sign of a potential scam. If a consumer speaks with a company who has contacted him or her directly regarding debt relief, it is imperative that he or she does the proper research to ensure that the company is legitimate. A general Internet search of the company on reputable sources should be able to help the person ascertain whether a scam is involved.

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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.

student loan debt, Student Loans

4 Student Loan Relief Measures that should be Implemented if Payment Pause Is Not Extended

It remains unclear whether the student loan repayment pause will be extended by President Biden. Two primary economic concerns urge the delay of payments past Feb. 1: Rising Omicron cases could jeopardize workers’ return to work, and given the pandemic-exacerbated racial disparities, borrowers of color will face ‘undue hardship’ if payments are restarted too soon.

If that’s the case, the organizations recommend four additional protections for student loan borrowers:

  1. Continue to waive interest for all borrowers;
  2. Return all borrowers in default on their debt to good standing to avoid financial penalties;
  3. Ensure all borrowers are aware of the process to apply for an income-driven repayment plan;
  4. Announce and implement provisions, like offering a grace period to prevent borrowers from immediately becoming delinquent on their debt.
Debt Collection

How to Dispute a Debt with a Debt Collector

Debt collectors can be relentless. They will attempt to contact a consumer through any means necessary to collect on a debt. Financial hardships can be stressful enough but dealing with the additional stress of collection calls can be a large burden in a person’s life.

Surprisingly, this burden is even dealt with by people who don’t owe any debt at all. In fact, according to Forbes, around 52% of debt collection complaints received by the Consumer Financial Protection Bureau in the last year were made by consumers that claimed they were being contacted regarding debts they did not have.

Bankruptcy Law, Consumer Bankruptcy

When Should I File Bankruptcy?

Chapter 7 bankruptcy is a powerful legal tool that allows those in financial crisis to cancel debts such as medical debt, credit card debt, and unsecured personal loans.

As soon as a Chapter 7 bankruptcy case is filed, the consumer receives immediate protection from his or her creditors. This protection comes from the automatic stay that is issued by the court upon filing. The automatic stay puts a pause on all collection actions, including collection phone calls, legal proceedings to collect on a debt, wage garnishments, evictions, and foreclosures. The automatic stay also gives consumers a chance to breathe and work with the court and bankruptcy trustee.  

Credit Card Debt

Paying Off Credit Card Debt? Avoid Making This Common Mistake.

Paying off credit card debt can be hugely rewarding. Just last year, Americans broke the record for credit card debt paid off, coming in at $83 billion. However, when it comes to paying credit card debt, many Americans make a mistake that can have a lasting effect on their credit scores.

In an effort to avoid amassing greater debt while preparing to pay off the existing debt, many will halt the use of their credit cards. This can result in the closing of your credit card account due to inactivity. When a credit card account is closed, your credit report can seriously suffer. This is due to the debt-to-credit ratio. This metric represents the amount of credit utilized versus what credit is available for the consumer. When losing a line of credit due to inactivity, your available credit declines and the distance between what is used and what is available increases.

Credit Card Debt

1 in 3 Shoppers Still Paying Off Last Year’s Holiday Debt

Going into the 2021 holiday season, an estimated 29% of shoppers that used credit cards for purchases are still struggling to pay off holiday debt from last year.

Following a record amount of credit card debt payment from Americans in 2020, card balances have already risen again by around $17 billion in 2021. With holiday spending expected to reach a maximum height this year due to product shortages, it will be especially difficult for shoppers to keep up with holiday debt.

student loan debt, Student Loans

First Wave of Public Servants Awarded Student Loan Forgiveness Through Temporary Program

The Biden administration recently announced the introduction of a temporary expansion of the Public Service Loan Forgiveness program. The program cancels outstanding student debt for public servants.

In order to be eligible, debt holders must have made 120 payments toward their federal student debt on-time for at least 10 years. The loans must have been made through the federal government and payments must have been made through repayment plans, most of which are based upon income. They must also work for the government or one of the non-profit organizations specified by the program. Many teachers, public defenders, Peace Corps workers, and law enforcement officers may qualify for forgiveness.

Debt in Divorce, Debt Relief

How Debt is Handled in Divorce

In a divorce, the married parties end up dividing assets accumulated during their marriage. Most people going through a divorce worry about dividing up their property and other assets. However, dividing up debt is just as important- if not more. This is of particular importance if the spouses do not have many assets.

A divorce judgment is where the court divides up the couple’s assets, as well as their debts. Part of this order involves determining which spouse is responsible for which debts. Normally, debts are divided equally between the parties, but that is not always the case when one spouse earns significantly more than the other or where one spouse is receiving more property that has debt connected to it than the other spouse.