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Durham Bankruptcy Law Blog

Young people are facing more credit card debt

The profile of credit card debt is changing for many young people in North Carolina. Millennials were once known for their aversion to overdue bills, especially as many of them became adults and entered the workforce during the 2008 financial crisis. As a result, many of them steered clear of credit cards. However, as millennials' salaries have grown and card issuers have developed new offers that are particularly appealing to younger people, they have taken on a growing burden of debt.

Along with that overall increase in credit card debt, young people now also have a greater share of delinquent debt. Over 8% of credit card balances carried by young Americans were at least 90 days overdue. This marks an eight-year high in the level of delinquent debt carried by younger people. Experts say that many people have been inspired to open credit cards as their own personal income has grown. These new cardholders often feel confident that they will be able to pay back their bills. Of course, personal circumstances like job loss or a sudden illness can interfere with those plans. When credit cards are involved, overdue payments can add up, especially as interest rates are high. Even people with good credit pay interest rates of 18%.

Should you dip into your home equity for unsecured debt?

Life has a way of getting ahead of us. Maybe you got into a car accident and couldn't work for several weeks. Perhaps an unexpected bill, like a busted furnace, threw a wrench in your budget. Regardless of how it happened, when you fall behind with your bills, it can become impossible for you to recover financially.

When you have trouble making ends meet, you are more likely to spend money on credit that you don't necessarily have. Your credit card bills can quickly start to exceed your monthly ability to pay. If your financial problems relate to an illness or injury, you may also have medical bills to worry about.

How medical debt can affect credit

Some people in North Carolina may be among the 30% of Americans who have at least $500 in medical debt. While medical debt can affect a person's credit score, it is treated differently from other kinds of debt. Medical providers do not report debt, but once it is in the hands of a collection agency, this can change. Even if the collection agency reports the debt, credit reporting agencies wait 180 days before they in turn report it to credit bureaus. FICO, the most common credit rating model, ignores balances that are less than $100.

There are steps that people can take before the debt reaches this point to help reduce the likelihood of affecting their credit. First, people should be familiar with their insurance and what it covers. They should get itemized bills from the provider as there are often billing mixups between insurance companies and medical providers. Some providers will agree to a payment plan.

Common strategies for paying off credit card debt

Consumers throughout the country owe more than $1 trillion in credit card debt. While an increase in credit card debt may be good for the economy as a whole, it isn't necessarily a good thing on a personal level. However, there are ways that a North Carolina resident can reduce or eliminate credit card debt balances. These strategies are called the snowball and the avalanche methods.

The snowball strategy says that a debtor pays down the credit card with the lowest balance first. Once that balance has been paid off, a debtor will focus on the card with the second-highest balance. This process continues until all credit card balances have been paid off. The snowball method can be ideal for people who want to see progress paying down their debts in a short period of time.

Tips for excellent credit after your bankruptcy proceedings

One of the primary reasons people give for choosing to postpone or avoid bankruptcy proceedings is concern about how bankruptcy will affect their credit score. While bankruptcy is a negative mark that stays on your credit report for some time, struggling with debt also damages your credit score.

Your credit report reflects when you make late payments, the fact that you have a staggering amount of debt and any judgments that a creditor secures against you. It is possible to use bankruptcy as a means of rebuilding your credit and rebooting your financial life.

The connection between cancer and bankruptcy filings

Those who discover they have cancer often become hyper-focused on the medical battle into which they are suddenly thrust. Dealing with the stress and physical consequences of cancer treatments like chemotherapy and radiation can require all of a person's energy.

The desire to win the battle against cancer is their sole focus. Doing whatever is necessary to heal and recover requires work. That mental focus can actually benefit cancer patients and improve their odds of success.

Old vs. new bankruptcy and the impact on credit scores

The credit scores that can affect many aspects of life for North Carolina residents are based on several factors, including whether an individual has filed for bankruptcy. Some filers may wonder if there's a difference between old and new bankruptcies when it comes to credit scores. The answer is largely dependent on what a debtor does after bankruptcy has been approved.

After filing for Chapter 13 or a similar type of personal bankruptcy, a credit score may actually improve. This typically happens because less debt is being reported. However, credit scores are also based on factors such as payment consistency, so it's possible for a debtor to maintain or rebuild their credit if they take the right steps to do so as they move forward after the bankruptcy.

Consumer debt figures recently released

As of February 2019, consumer debt in the United States totaled $4.05 trillion. Individuals in North Carolina and throughout the country saw their revolving debt increase by $35.4 billion while consumer debt increased by $31.4 billion in January 2019. Non-revolving debt increased by $148.6 billion in February, which was lower than the increase seen during the previous month. Revolving debt generally means credit card debt while non-revolving debt generally refers to auto and student loans.

Mortgage debt and home equity lines of credit are not factored into overall debt totals. According to Federal Reserve data, consumer debt rose at a 4.5% annual rate. That was lower than the 5.3% annual rate in January and an increase from 4.2% in December 2018. The overall increase from January to February was about $15.2 billion less than what had been forecast.

Report: millions of Americans delinquent on their auto loans

When times are tough and must decide whether to feed your family or make your car payment, you’re probably going to choose your family. You’re not alone. A new report published in February 2019 revealed as many as 7 million Americans were more than 90 days overdue on their car payments. Late payments typically incur late fees which increase the amount you owe

The New York Federal Reserve believes there are several possible explanations for this trend:

Strategies for paying off student loan debt

You’ve just graduated from college and are ready to take on the world. Six months later, the first bill arrives and it’s time to repay your student loans. Approximately 45 million Americans are in your position. Student loan debt doubles credit card debt in the United States, putting a financial strain on our nation’s recent graduates.

There are ways to manage this debt. Focusing on the principle amount is daunting but that’s the wrong way to look at it. If you were climbing a mountain, wouldn’t you prefer to take the journey one step at a time instead of focusing on how far you are from the summit? Paying back your student loans is similar. Focus on making your payments month-by-month rather than the full loan balance.

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