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Knoxville Bankruptcy Law Blog

Beware of scammers offering debt relief

Dealing with overwhelming debt is never easy, and many try to find solutions for their predicaments on their own that does not include bankruptcy. Instead, they seek other alternatives that they believe will be just as effective, such as debt consolidation. However, as one Tennessee woman recently found out, many companies exist that prey on unsuspecting consumers looking for debt relief.

The Knox County woman had incurred a considerable amount of debt through credit cards and personal loans. Seeking relief, she searched online for a company that would offer her a consolidation loan of $10,000 to combine all of her debts. Not long into the process of searching, she found a company that offered help.

Credit card debt preventing many from saving money

For many Tennessee residents and others around the nation, it is difficult to save money for future needs. Those in the financial industry urge consumers to save for their retirements and for emergency needs as well. Unfortunately, those who have incurred a substantial amount of credit card debt are unable to put aside money for any reason.

According to a recent survey by a consumer financial services company, almost 25 percent of adults have less money in their savings accounts than they owe to credit card companies. While 17 percent of those surveyed don't have any balances on their credit cards, they still have no money saved. Experts strongly suggest rectifying this situation by making efforts to reduce debt and increase savings.

Develop a plan to reduce credit card debt

The nation's economy has recently been moving in a positive direction. This is a good sign for many Tennessee residents. However, there are many consumers throughout the country that continue to be burdened with substantial credit card debt. Reports from a lending exchange company show that over 40 percent of those with debt from credit cards were only using them to keep up with monthly expenses. Experts suggested some issues that consumers may use to break this cycle of debt and get a better handle on their finances.

It is important to thoroughly understand one's income and expenses. Having a long-term goal of eliminating credit card debt may require some short-term adjustments. Reducing the number of times of dining out, eliminating some features on a cable plan or cutting back a cellphone package are just a few options to try. In addition to cutting expenses, there may be ways to increase income. A part-time job or a short-term second job could provide extra funds to reduce debt quicker.

Wage garnishment is not the end of the road

Few things in life may be as frightening as learning that your wages are being garnished. When you are already facing nonstop bill collections and harassing creditors, suddenly bringing home a much smaller paycheck can be terrifying. However, you are not without options. In Tennessee, it is possible to stop wage garnishment and address your overwhelming debt through bankruptcy.

Wage garnishment often arises when you are significantly behind on bill payments. This could be for your car note, mortgage or credit card bill, and in some instances you may even face repossession of your vehicle. Although creditors might use your garnished wages to slowly chip away at your debt, losing out on some or most of your paycheck often makes it impossible to afford the basic daily costs for living.

3 common credit card debt myths

The U.S. has already reached a new milestone in the first month of 2018. According to people at the Federal Reserve, the total amount of credit card debt in the United States has exceeded over $1 trillion. This is a new high, and it should be a wake-up call to many people to get their finances in order. 

Whether you have a few thousand dollars in credit card debt or over $50,000, there are steps you can take to try to get some relief. One option is bankruptcy, but it is not the right course of action for everyone. No matter which route you take, you should be aware of the various myths out there surrounding credit card debt so you do not make matters worse. 

Health care credit cards might be driving up medical debt

Even with insurance, the cost of accessing medical care is a barrier that many people in Tennessee face. As a solution, some doctors' offices now offer medical credit cards, giving patients lines of credit on which to charge their related bills. Unfortunately, this approach may drive some even further into medical debt.

Putting medical bills on an existing credit card is not a new phenomenon, but many medical professionals now offer credit cards specifically for this purpose. These lines of credit usually offer deferred interest and are presented as smart options for patients who cannot pay the full price upfront. However, some experts believe that these cards are predatory and may actually exacerbate people's financial problems.

Credit card debt reaches new high

Most Tennessee consumers are likely carrying more credit card debt than they were before the holiday season. In fact, across the United States, credit card debt is currently the highest that it has ever been, and some experts are worried. Although many people seem to be managing their debt well enough, soon-to-rise interest rates and lower income consumers may struggle to repay what they owe.

Nationwide revolving debt -- which includes credit cards -- reached an all-time high just before the 2008 Great Recession. Credit card debt declined during the recession, and recently hit a new high at $1.023 trillion in Nov. 2017. Consumers added $11.2 billion to their credit cards between Oct. and Nov. 2017 alone. During that same period, debt for nonrevolving credit -- such as car and student loans -- also increased, and topped out at $2.804 trillion.

Chapter 7 Bankruptcy is not an end, but it is a new beginning

Life after bankruptcy in Tennessee and other states can be better than it was before the bankruptcy. Contrary to urban legends and exaggerated rumors, one is not prevented from having financial accounts going forward. The main feature of the aftermath of a Chapter 7 bankruptcy is instead the peace of mind that comes from erasing overwhelming unsecured debt, such as all credit cards, unsecured personal loans and medical bills. 

The effect on one's credit is not as drastic as may be portrayed in the financial world. There is indeed a negative impact, but it is often muted due to the fact that most people who file already have seriously declining credit scores and records. Those low credit scores and shaky records are not greatly reduced by a bankruptcy; in fact, a certain positive effect is noted by the fact that one's prior dismal inability to take on new credit is transformed for the better by the filing.

Credit card debt signals possible consumer crisis ahead

Numerous young adults in Tennessee and around the country are deep in debt. Some experts predict that many of these young people are not expected to pay off the huge tabs that they are creating. Part of the problem may be that many of those who are burdened with overwhelming credit card debt are also facing or will face hefty student loan debt. Despite the fact that student loans are usually not dischargeable in bankruptcy, many people cannot even consider paying student loan debt when they are burdened with overwhelming unsecured debt.

In a Chapter 7 bankruptcy, an individual or married couple can erase all credit card and medical debt permanently, without making debt management payments. Even if one comes out of a bankruptcy with his or her student loan still due, the relief may be well worth it. There may be no other rational way to encounter and deal with the student loan debt.

Wage garnishment and protection from impoverishment

Tennessee residents are by no means immune to the economic strife and financial strains many others throughout the nation have experienced in recent years. Anyone who follows news concerning consumerism in America is likely aware that credit card debt is a major source of trouble in most states. In certain situations, a wage garnishment order may be issued as a means of collecting payment for debt.

The problem is there are a myriad of households in the United States where families depend on every penny of their income just to make ends meet. If the government garnishes those wages as payment for existing debt, some people could very well be left without food on their tables. To protect workers from impoverishment under wage garnishment, the Consumer Credit Protection Act was implemented.

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