Kim Covington | A personalised & Sensitive Approach to Bankruptcy
The The Law Office of Kim Covington blog shares Bankruptcy Law stories and opinions relevant to Eugene, Oregon residents. I am an attorney for bankruptcy and foreclosure prevention, I am passionate about helping my clients overcome financial obstacles.
With the rise in interest rates has also come an increase in late credit card payments. According to Business Insider, while late payments on other kinds loans (student loans, for instance, and mortgages) remain the same or are in fact decreasing, late payments on credit cards are on the rise.
According to Michael Pearce, a senior US economist at Capital Economics, the rise in late payments does not indicate a crash like 2008. It could, however, be a portent of things to come.
People facing heavy credit burdens, though, often succumb to the temptation to empty savings and retirements accounts to pay credit card debt, even taking out new loans against the equity in the homes they have so patiently build back up after the 2008 crash. Worse, people are sometimes told to do so by creditors and collection agencies.
The law does not require you to do that. In fact, society wants you back in the game. A bankruptcy enables you to start from scratch by eliminating your credit card debt so you can keep most common retirement accounts. It does not help society if lose your retirement and end up needing public support at the end of your working life.
If you are told by a debt collector that a bankruptcy will not help you or that credit card cannot be eliminated in bankruptcy, do not believe them. They are not there to advocate for you. To get an advocate, someone who will be in your corner for you and you alone, contact an experienced bankruptcy attorney who is bound by attorney ethics rules to advise you as to your options and which ones work best for you.
Oregon residents may not file for bankruptcy because of the stigma surrounding it. However, it may be harder to truly get a fresh start after filing for those who wait too long to file. As a general rule, anyone who has a debt-to-income ratio of more than 40 percent should file for either Chapter 7 or Chapter 13 protection in the near future. The same is true for anyone who is not able to buy food or other necessities.
However, certain types of debt cannot be eliminated in a bankruptcy. For instance, student loans and court judgments are generally ineligible to be discharged. However, people who have credit card, medical or similar types of debt will likely find relief by filing for bankruptcy. Finally, a key sign that filing for bankruptcy may be prudent is the fact that a person goes into debt to pay off old debt.
In many cases, an individual's credit score will go up after filing for bankruptcy, according to a 2014 report from the Federal Reserve Bank of Philadelphia. On average, a person's score will increase by 82.1 points between the time he or she files and the time a case is discharged. Debtors who are unsure about what type of bankruptcy to file for should speak with an attorney or credit counselor.
Individuals who are looking to get a better handle on their debt may benefit from filing for Chapter 13 bankruptcy. This may allow them to reorganize their debt balances and repay them over a period of three to five years at an affordable monthly payment. During this time, creditors generally cannot take action like foreclosing on a home or repossessing a car. A lawyer may be able to advise someone more about the additional benefits of filing for bankruptcy.
Families can face all kinds of expenses, including the many related to raising children. It is not uncommon for families to turn to credit cards to help with these costs.
Many things can have major impacts on families that use credit cards. This includes the annual percentage rates of the cards they use. However, a recent survey indicates that many consumers are unaware of what their APRs currently are.
APRs dictate how much interest is charged on credit card balances. The current average APR is 16.71 percent. However, these rates vary greatly from card to card. Also, what APR a card has can change over time.
The recent poll asked a group of adults who had one credit card or more and who had carried a balance sometime over the past half year whether they for certain knew what their APRs were. Less than four of ten of these respondents, 39 percent, said that they did for all of their credit cards. Why do you think this number isn’t higher?
Why does it matter whether consumers know their APRs? When they don’t know this information, they don’t know how much having a credit card balance would cost them. This could increase their chances of inadvertently falling into a higher level of credit card debt than they expect and can handle.
So, staying informed of their APRs and other key details about the credit cards they use can be a very important step for families in keeping their credit card debt manageable.
Staying informed can also be critical for families when they end up with overwhelming credit card debt. Specifically, it can be important for such families to seek out information on what options they have for trying to get out from under such debt.
Having a credit card is a big responsibility. Seemingly limitless money can be dangerous and it’s easy to dig yourself into a financial hole.
Good credit can help you in the long run, should you want to apply for a loan or mortgage a house. But if you are reckless with your spending, your credit will not help you in the future.
However, there are different ways you can start to rebuild your credit should you get yourself in a bad financial position. Here are a few ways you can get back on your feet and work to repair your credit.
See what you’re up against
Seeing where your credit stands is a good first step in rebuilding it. You can get a free credit report from a few different online services. When you see your credit score you can also check to make sure there aren’t any inaccuracies.
Check your patterns
You can also see what bad habits you may have. This is a good way to work on improving your credit score in the future because you can start to learn from your mistakes. See what patterns you may have developed that aren’t financially smart.
A smart way to start rebuilding your credit is to keep your credit card balance low and repay it in full each month. For example, start using your credit card for only small transitions such as filling your car with gas. This will ensure that your balance stays low month-to-month so you can pay it off completely each time.
Paying your bill in full each month will help raise your credit score.
If you are the primary holder on your credit card, you can set up a limit for your spending. This can help you keep a budget and make sure you have the finances to keep up with your bills. Keeping a stricter limit can help you get your finances in check.
Credit card debt and facing your credit score can seem daunting but there is always hope. Start rebuilding your credit sooner rather than later to get back on track.
Consumers in Oregon and elsewhere may use credit cards to fund a variety of financial transactions. While making smaller purchases on credit accounts might seem harmless, these purchases can add up quickly if a person isn't careful. However, while a person can amass high amounts of credit card debt under a variety of circumstances, financial experts suggest that there could be consequences to placing certain purchases on similar accounts.
While tax season takes place the same time every year, many may be unprepared when a tax bill comes due. In times of financial need, one may choose to turn to a credit card to cover monetary obligations, but experts suggest that using similar methods to pay for taxes isn't advisable. In addition, using a credit card to pay for big ticket items that a person would otherwise be unable to afford could bring about extensive monetary hardships in the future.
Studies also suggest that using a credit card to cover college tuition or mortgage payments can also be detrimental. Placing substantial purchases on an account with high interest rates could lead to significant financial concerns. With the high costs of treatment, those who experience a medical emergency could consider using a credit card to pay the bill, but a similar decision may only provide temporary relief and create a long-term financial issue.
Those who experience the burdens of dealing with credit card debt may wish to protect their financial futures, but they might be uncertain how to achieve their goals. For guidance on how to reduce or eliminate similar debts, a person in Oregon could find it advisable to consult with an experienced attorney. An attorney can help a client form a strategy to pursue debt relief and provide guidance on how to steer clear of similar hardships in the future.
It was an emergency. Your daughter was injured in a car accident and had to be rushed to the hospital. She was bloodied and bruised, broke her leg, and is now on the road to recovery. Nevertheless, it was a shock that no parent wants to experience.
Weeks later, a second surprise hits: Sticker shock from the medical bills that ranged from emergency care, physician consultations and treatments to prescriptions. It's all too much, and you just can't pay it right now.
Many Americans find themselves in similar scenarios. According to the Consumer Financial Protection Bureau, 20 percent of U.S. residents have medical debt on their credit report. Unpaid medical debt can lead a person or a family closer to bankruptcy.
Negotiate, work out payment plan, crowdfund
As a matter of fact, medical bills are the No. 1 reason people file for bankruptcy. But there are a few things that you can do in attempting to work out a deal to pay these bills and get back on the road to financial recovery:
Thoroughly read the bill: Don't ignore medical bills, or any bills for that matter. Check all the details related to procedures, medications and other services. There may be some errors, including being double-billed or billed for services that did not take place.
Negotiate with your medical provider and talk to the billing department. You can likely work out an interest-free payment plan that has no fees. For example, they may allow you to pay a $6,000 bill over a period of 18 months, but you must make the minimum monthly payment. Medical providers don't want to send patient bills to collection agencies, so they may work with you.
Find out about assistance plans: If you qualify, you may enroll in state and federal medical assistance programs.
Consider crowdfunding: With a once-in-a-lifetime medical procedure, one may consider arranging an online fundraiser through a site such as GoFundMe. The results can be a blessing to help pay off excessive medical bills as family, friends and, even, strangers may pledge money toward your medical debt.
Pay your bill: Slowly, but surely take the necessary steps you need to pay the bill.
With high deductibles and an increasing number of co-pays, some people just can't afford to pay their medical bills. But try to keep calm, take action, and eventually matters just may work out.
Carrying substantial amounts of debt can be a burden for many individuals in Oregon and elsewhere, regardless of age. However, those who are saddled with debt upon entering retirement may face additional challenges that often come with living on a fixed income. Since monetary struggles could have a devastating impact on the life of a retiree, those experiencing such troubles could find it helpful to speak with a bankruptcy attorney for advice on how to pursue some much-needed relief.
Many individuals spend years saving and forming a strategy for retirement. However, upon coming up with a plan for this period in life, few may factor in the possibility of entering this stage with high amounts of debt. After reaching a certain age, some may experience a decrease in their ability to earn, and when living on a fixed income, added financial obligations can prove exceedingly challenging to endure.
Unfortunately, studies suggest that many individuals are entering retirement with outstanding debts. While the majority of these debts may revolve around mortgages, studies also indicate that credit card and medical debts are a growing concern for many. These issues could lead a retiree to attempt to cut expenses that may otherwise be necessary, such as medications or even everyday items that are necessary to life.
Debt can have a wide range of negative impacts on a person who is entering or has entered retirement. Those who face significant financial concerns at this point in life may wish to protect their financial futures, but they might be uncertain where to turn for guidance. A bankruptcy attorney in Oregon can evaluate a person's financial situation and provide guidance on the best course of action to take to reduce or eliminate debts and pursue monetary relief.
With the high costs involved in seeking medical care, it may take little more than one sudden and unexpected trip to the hospital for an individual in Oregon to become encumbered with debt. Those who experience such emergencies may feel they are left with few options, and some may turn to a credit card for relief. However, paying medical bills with a credit card might not be the best solution, and seeking guidance on the other options available could be advisable.
Upon receiving a bill for medical care, attempting to figure out how to cover the full amount can be a harrowing process. However, paying the entire bill in one payment might not be necessary, and a person could consider attempting to negotiate a payment plan. In some cases, those who are struggling financially may also be eligible for financial aid, and there might be programs or organizations that can provide assistance to those in need.
By communicating with the necessary parties, a person may also be able to negotiate a reduction in payments. While using a credit card to pay for treatment might not be advisable, other lines of credit could prove to be a viable option at times. For instance, the interest rates on a personal loan may be significantly lower than those on other credit accounts.
With the stress of one's medical bills looming overhead, exploring every available option could be essential to preventing a financial disaster. Those who are experiencing such concerns could speak with an attorney for guidance on addressing the issues and hand and forming a strategy on how to proceed. A bankruptcy attorney can assist a client in Oregon in pursuing relief from debts through the necessary channels and provide guidance on how to protect against similar concerns in the future.
Many individuals in Oregon and elsewhere consider it essential to cultivate and maintain a positive financial future. While working toward improving one's credit score, there may be several available options to assist in the process, one of which is a credit card. Those who wish to make use of a credit card may find it advisable to gain an understanding of how to use one responsibly, and where to seek guidance should financial issues arise.
With high interest rates that accompany many credit cards, if at all possible, one may find it beneficial to clear out any remaining balances each month. Even if a person cannot pay the balance off in full, paying the minimum amount owed by the due date could prove vital, as late fees could harm one's credit and cause interest rates to increase. Financial experts also suggest that it is advisable to keep balances under 30 percent of the approved credit limit.
One way to prevent credit card debt from being a concern is to only use a credit card for emergencies. Certain credit accounts may also offer rewards programs such as periods free of interest or cash rewards. Paying close attention to these offers could help prevent a potential disaster, as failing to pay off a balance before the end of a promotion could lead to devastating fees.
A credit card can act as a tool to help one build a healthier financial future, but it can also open a person up to certain financial risks. Those who began to experience significant financial concerns due to credit card debt could consider speaking with a bankruptcy attorney for guidance on the available outlets for relief. An attorney in Oregon can address a client's concerns and provide guidance in making informed decisions regarding his or her financial future.
It’s simply not a good idea to use your credit card to pay for medical costs, especially now that a more consumer-friendly law was implemented nationwide last fall. Many Americans are smothered in credit card debt and others face mounting medical debt due to a combination of high deductibles and alarmingly high out-of-pocket expenses.
Why mix the two? It’s a combination that can only put you further in debt by paying exorbitant credit card interest rates that will, ultimately, harm your credit score.
Before pulling out that plastic card to pay your medical bill, remember that it’s a lot easier negotiating with a hospital than it is with a credit card company. The former is simply more flexible, while the latter usually won’t budge.
Hospitals may work with you
Many hospitals will work with you in setting up a payment plan, either at low interest rates or, sometimes, interest-free. Once you have an agreement in place, make sure that you abide by it. Hospitals want to see that you are making regular attempts toward making payments.
Hospitals and physicians do not report a person’s medical bills to credit-reporting agencies. Your credit score won’t be affected even if you’ve made a late payment. However, this will change if you neglect to pay your bill for a long enough time and your case gets sent to collections. (Hospitals and physician’s offices typically retain collection agencies to collect from patients.)
Medical debt won’t go on credit for 180 days
But you still will have time to organize a payment plan, though, even after your bill has been sent to a collections agency. Under a new law implemented in September, the major credit reporting agencies – Experian, Equifax and TransUnion -- are required to wait 180 days before including medical debt on a person’s credit report.
The six-month period will give you time to work things out. And once that period has been met, the newer credit-scoring formulas that kick in don’t view medical debt as severely as credit card debt.
Collections are after 43 million people for medical debt
According to a 2014 report by the federal Consumer Financial Bureau:
Roughly 43 million Americans have medical debt that’s in collections, thus unfavorably affecting their credit scores
The average amount of medical debt in collections was $579, compared with $1,000 for non-medical debt.
Medical debt was the only flaw on the credit report of some 15 million people.
Medical debt is not a good indicator as to whether someone is a good credit risk. One never knows when an emergency medical situation will arise, thus bringing potential financial hardship to a family. When it comes to paying your medical bills, try to work with your hospital first. Save the credit card for some other expense.