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Knoxville Bankruptcy Law Blog

Does credit card debt point to a future financial crisis?

With a strong economy and low levels of unemployment, consumer confidence is high. This leads to increased spending, which may leave some consumers with a large amount of credit card debt. Rising levels of credit card debt are especially concerning considering that most people in Tennessee received smaller tax refunds or no refunds at all, and wage levels continue to remain stagnant. 

Credit card debt is a common issue for middle class, but statistics indicate this is a growing concern for upper middle class as well. This group of consumers has more expendable income and assets to handle a larger balance, but they often do not pay off this type of debt. The result is more and more American consumers nearing or entering retirement with a significant amount of credit card balances

Medical debt is a serious problem for many in Tennessee

The future is unpredictable, and medical emergencies can strike at any time. For many in Tennessee, unexpected injuries and serious illnesses can lead to significant medical debt, and they may not be able to keep up with the payments. Studies find that medical debt can be a problem for people who have insurance coverage and those who do not.

Over the last several years, rising health care costs have led to employers offering plans with higher deductibles, leaving employees to cover a significant portion of their own health care expenses. As recently as 2018, a startlingly high number of Americans were unsure that they could manage a medical bill of just $400. Costs for medical treatment continue to rise, leaving more and more people with bills that far surpass their ability to pay.

Understanding the differences between Chapter 7 and Chapter 13

If you find yourself in serious financial difficulties and have begun to consider filing bankruptcy in Tennessee, you probably have many questions. Your most basic question likely is which type of bankruptcy you should choose.

As you might expect, both Chapter 7 and Chapter 13 give you certain advantages. Each type, however, also brings with it its own disadvantages.

The significant negative impact of credit card debt

When a person is unable to manage his or her debt, it can often result in various negative consequences, including calls from creditors, accumulating interest and even wage garnishment. Credit card debt is one of the most common types of consumer debt, and many people with credit cards have accumulated balances that are far beyond what they can hope to pay off on their own. Some Tennessee credit card holders are subjected to wage garnishment as a result of late credit card payments.

There are certain steps a creditor has to walk through in order to start the garnishment process. In cases involving credit card debt, the creditor must successfully sue the debtor first. After that, they may begin garnishing wages from a person's paycheck or start the nonwage garnishment process, which is taking money from a debtor's bank account.

Think Chapter 7 bankruptcy will ruin future finances? Think again

Many Tennessee consumers struggle with certain types of debt, particularly unsecured debt like medical and credit card debt. These balances can quickly grow beyond a person's control, leading to financial stress, accumulating interest and calls from debt collectors. Filing for Chapter 7 bankruptcy can help a person discharge many types of unsecured debt.

One thing that often keeps people from moving forward with a bankruptcy filing is fear that it will ruin their financial future. While a bankruptcy filing does stay on a credit report for up to 10 years, it is possible to rebuild a strong financial standing. After bankruptcy is complete and eligible debts are discharged, it can help to create and stick to a reasonable budget. It may also be helpful to avoid using credit cards excessively and to make sure to pay bills on time each month. 

Could debt relief help you manage your monthly bills?

Juggling multiple monthly payments can be an overwhelming task for the average person in Tennessee. Unfortunately, many people find themselves in the position of deciding which bills to pay and which to put off for another time. While virtually no one plans to end up in this situation, it can happen to almost anyone. However, debt consolidation could help some people achieve the debt relief they need.

Taking out a new loan when already drowning in debt might seem counterintuitive to some people, but it can be incredibly helpful. A person who takes out a personal loan can use the money to pay off several debts, including credit card balances, auto loans and more. Since personal loans have fixed interest rates and repayment periods, they allow individuals to go from balancing several different monthly payments to just one.

Medical debt piles up on insured persons without relief in sight

Tennessee residents are struggling with medical bills and insurance coverage in the same manner as their counterparts throughout the country. A shocking and demoralizing aspect of medical debt these days is that even if a person or family has medical insurance, he or she is likely to be burdened with surprise bills that are not covered by insurance. Many surgeons, for example, practice independently and don't recognize or participate in various major insurance plans.

When the insured patient declines to pay the bill due to the belief that he or she was fully insured, the bill will likely be turned over to a collection agency for a period of incessant dunning of the patient. This ultimately may lead to the filing of a lawsuit, and if no defense is presented or if a defense does not prevail, it will lead to the entry of a judgment against the patient. When a judgment is entered against one who owns real estate, a lien attaches in most cases to the property.

Credit card debt and 90-day delinquencies reach record levels

The popular perception in recent years has generally been that the credit card debt load of consumers was under control. The bankruptcy numbers were down, the recession ended, and the prior dramatic reports of a credit card crisis were at a standstill. Recent data from the Federal Reserve, however, reveals that U.S. credit card debt hit an all-time record high of $870 billion as of Dec. 2018, a trend reflected in Tennessee as well as most other states.

The news contains an even more ominous note and that is that delinquencies are also up. About 37 million credit card accounts reportedly carried a delinquency of more than 90 days in the fourth quarter of 2018. That was an increase of about two million from the fourth quarter of the preceding year. In addition, it may be a sign of economic troubles ahead that a few of the largest food chain retailers are banning payments by credit card due to disputes over the fees charged.

How bankruptcy can eliminate medical debt

Suffering a serious injury or dealing with severe illness is devastating on its own. The high medical bills you receive as a result of diagnosis and treatment only exacerbate the stress. You may not have any idea about how to afford these skyrocketing medical costs, especially if you are experiencing lost income or reduced credit availability.

Filing bankruptcy is one viable method for getting out from under medical debt. Declaring bankruptcy may be the best thing you can do to get relief from unmanageable medical debt. Learning about your different options under bankruptcy law will help you make the right decision.

A HELOC may manage credit card debt but caution is advised

Many residents of Tennessee continue to confront debt management problems with respect to credit cards. One problem is that the interest rate and fees imposed on credit card debt is some of the highest debt that one can take on. Due to the expensive cost of that kind of credit, some people have transferred their credit card balances over to a home equity line of credit, or HELOC. This debt relief remedy can substantially lower the amount of interest that one pays on the borrowed funds.

However, the National Foundation for Credit Counseling cautions consumers that this type of move can present its own serious risks. The problem is that such loans inevitably represent a second mortgage on your home and a default in the payments can lead to collection activities, including ultimately to foreclosure. In addition, after transferring one's debt from a credit card onto a home equity line, the consumer may be tempted to begin running up more credit card debt.

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