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Durham Bankruptcy Law Blog

3 ways to delay student loan payments

Young people are often told that a college degree is the only way to get a good job, and getting a good job is the only way to succeed in life. With stakes this high, it is no surprise that many students take on massive loans without thinking twice. Unfortunately, the reality of such debt often becomes clear when it comes time to start making payments. The monthly bill is often simply too high to handle.

According to The Institute for College Access and Success, the average student debt amounts to $23,450. If you are dealing with student loans and struggling to pay the bills, you may be looking for ways to delay payments. There are several options available, and these are three of the most common. 

A creditor may be able to take your bank account funds

Imagine the scenario: You come upon tough financial times. Perhaps you or your spouse lost a job in North Carolina, and you are trying to hang in there on one income. You have had to miss a few car payments to the bank holding your car loan. Other debts are growing as well.

If the bank where you have your defaulting car loan is also the bank where you or your spouse’s paycheck goes to, there is great risk. The last thing you need to see is your checking account frozen or funds taken from it by your bank to pay that car loan debt. However, if you do not address the debt situation in a timely manner, you create this risk.

The Medical Insurance-Bankruptcy Pipeline

Open enrollment for medical insurance under the Affordable Care Act begins this week. The program has been, in many peoples’ view, a mixed blessing. On the one hand, it imposes financial penalties on most individuals who choose not to be insured. On the other, it has helped millions of people, who would otherwise have no access to adequate care, obtain the insurance they need.

More than 500,000 people in North Carolina are expected to sign up. As The News & Observer notes, most who do will benefit. The government offers subsidy programs to many who cannot afford ACA programs on their own, whereas uninsured individuals who incur unexpected medical expenses often find themselves in crippling debt. (Such debt, in fact, is the focus of this short article.) 

Chapter 7 does not leave North Carolina petitioners with nothing

Finding the best way to move on from considerable consumer debt can be challenging. For North Carolina residents struggling with this type of situation, they may fear taking the route of Chapter 7 bankruptcy because of negative misconceptions. However, this option could prove beneficial for many people trying to deal with substantial consumer debt.

Though Chapter 7 bankruptcy involves liquidation, this does not mean that a person who follows this route will lose all of his or her possessions. In fact, 95 percent of Chapter 7 cases leave individuals with all of their assets because the petitioners do not go over the legal threshold. As a result, parties often have the ability to move forward with discharging debt and keeping their property.

Chapter 7 may be better alternative than using IRA to cover debts

It is not uncommon for North Carolina residents to find themselves with financial troubles. Debt issues can impact anyone, and when those outstanding balances become too much to handle, people often find themselves looking for ways to get out from under their burdens. Though Chapter 7 bankruptcy is a viable option for many individuals, some parties may first consider other possible avenues, including taking money from retirement accounts.

Though it may seem like a no-brainer to use already existing funds to cover your debts, dipping into an IRA could have its downsides as well. If a person wants to withdraw money from an IRA, a 10 percent penalty will apply for for early withdrawal. Additionally, those funds will also be subjected to taxation.

Congressional decisions could impact medical debt across country

North Carolina residents may have various opinions when it comes to health insurance. Nonetheless, most individuals can agree that costs associated with medical care can become burdensome to deal with at times. When parties accrue considerable medical debt, they may feel that their ability to make ends meet is substantially hindered by these outstanding balances.

It was recently reported that numerous hospitals across the country have seen an increase in unpaid bills. This increase appears to relate to insurers putting more responsibility on patients to cover costs. For one hospital chain that has facilities across the country, a 4 to 5 percent increase took place when it came to uninsured admissions. Additionally, another operator also indicated an increase in unpaid medical expenses.

Collections attempts may cause many to seek debt relief

Dealing with debt issues can often make North Carolina residents feel embarrassed. They may think that other people will judge them for the state of their finances and also feel uncertain as to how to find the debt relief they crave. Individuals in this predicament may also fear what debt collectors may do in order to attempt to obtain payments.

Though debt collectors can take certain actions, there are also several actions that they are prohibited from carrying out. For instance, collectors cannot come to someone's place of employment in hopes of collecting on debts. However, they could call a person's workplace. If an individual asks the collector not to call the workplace, the collector must cease such actions under law.

Settlement may not bring as much debt relief as bankruptcy

North Carolina consumers dealing with substantial debt rarely find their financial situations easy to handle. They may scrap and save, hoping to make a dent in their outstanding balances, only to never see much impact. As a result, they may begin exploring various debt relief avenues, and for some, a debt settlement may seem appealing. However, many individuals may not fully realize the impacts of this option.

Though settlement companies have become more reliable recently than they had been in the past, this option may not offer the benefits that some other relief alternatives could. For instance, this option deals with negotiations involving lenders, and in many cases, the negotiations can take years to reach. During that time, clients are told to stop making payments on their debts, which could put them at risk of being sued by creditors.

Many may consider personal bankruptcy due to outstanding debts

Many individuals have a difficult time handling accumulated debt. How individuals in North Carolina and across the country choose to address their debt can vary from person to person. For those with substantial liabilities and who feel as if they may never get out from under their outstanding balances, considering personal bankruptcy may be a worthwhile step.

It was recently reported that a new record high was reached when it comes to household debt. From the first quarter of the fiscal year to the second quarter, household debt increased by $114 billion. As a result, the total household debt for the second quarter reached $12.84 trillion. One bright side of this debt situation, however, is that questionable mortgage debt does not appear to be as big of an issue as it has been in the past.

Many North Carolina residents may qualify for Chapter 13

Deciding to take a serious approach to handling personal debt is a major decision. North Carolina residents who are looking to take action may feel a well-deserved sense of accomplishment as choosing to take on such an endeavor can set parties on a path toward financial freedom. For some, Chapter 13 bankruptcy may offer the most interest when exploring options.

Chapter 13 bankruptcy essentially involves reorganizing a person's debt in order for him or her to repay the outstanding balances over time. Typically, the process lasts between three to five years. In order to qualify for this relief avenue, individuals must meet certain income and debt requirements. Too little income or too much debt may disqualify parties from following this particular path.

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