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Chattanooga Bankruptcy Law Blog

Top purchases underlying millennial credit card debt

Credit cards have driven up household debt over the five years. Unanticipated expenses, college loan payments and low wage growth are the usual culprits. Other avoidable expenses, according to data from the Tally credit card managing app, have also contributed to credit card debt for 18 to 34-year old consumers.

Tally performed a survey of 6,500 of its mostly millennial users and reviewed transactions between Jan 2017 and Oct. 2019. One group had above-average balances between $11,000 and $20,000. The second group had balances up to $3,000. Both groups usually had the same type of spending.

Possible prescriptions for medical debt relief

Over 25% of Americans are having trouble paying off a recent medical bill, according to a survey by the Kaiser Family Foundation and the New York Times. But there are practical methods that may keep medical debt from becoming overwhelming.

An obvious but overlooked task is making sure that there are no overcharges for recent medical services. Doctors' offices and hospitals sometimes make billing errors. In fact, 80% of medical bills contain some errors according to some estimates. Bills should only contain charges for services and medications that were provided. If there is any charge that makes no sense or appears wrong, ask the health care provider for an explanation.

Paying off credit card debt

Credit card debt can sink financial solvency and lead to bankruptcy. There is currently $1 trillion of credit card debt in this country. But there are workable ways to pay off credit card bills.

The avalanche method starts with paying off the credit card rate with the highest interest rate first. After this card is paid off, the credit card with the next highest rate should be paid next. This should continue until all credit card debt is resolved. The avalanche method is recommended for reducing the most amount of credit card interest. While this method is being used, minimum payments must be made on all other credit cards.

You're in debt. Is bankruptcy a viable option?

Do you consider yours an average Tennessee household? If so, then you've likely had your share of financial ups and downs in the past five to 10 years. Even if you have dual income earners in your home, economic strain is not uncommon in this state or throughout the country. How quickly and well you can bounce back when your financial train goes off-track depends on several factors.

Understanding the types of issues that often lead to serious debt may help you avert a disaster. Then again, if you're used to living paycheck to paycheck or having to tap into savings to make ends meet, it might not take much to spark a severe financial crisis. That's why it pays to know ahead of time what type of support resources are available.

Bankruptcy exceptions can protect assets

Bankruptcy can provide a fresh start after incurring insurmountable debt. Chapter 7 exemptions provide bankruptcy protection over a debtor's property while dealing with debt. Chapter 7 bankruptcy is typically a faster and easier process than Chapter 13. Under Chapter 7, most property may be protected. Chapter 13 provides for a 3- to 5-year repayment plan equal to the value of nonprotected assets and works better for debtors who can afford the payment plan.

Debtors in Tennessee can take advantage of exemptions provided under state law but not federal bankruptcy law. State and federal exemptions have many similarities, however. Typical exemptions include life insurance benefits, cars, pensions, retirement benefits, residential property and work implements such as tools and inventory. State law places a monetary limit on each exemption.

The good and bad of credit cards

Having a new credit card can provide perks and better credit. But this can also lead to problems such as credit card debt and a bad credit score. The best reasons for opening a new credit card include new member bonuses such as bonus points, miles, and cash back. Different rewards cards also give a variety of rewards for specific spending behavior that can reflect a Hamilton cardholder's spending habits. Cards may also provide different extras such as extended warranties on purchases, travel or car rental insurance or access to airline lounges. It is important to learn how to use these benefits.

A new credit card may be an excellent method to build a positive payment history by using the card and paying the full balance each month. This also improves the credit utilization ratio that plays a role in setting a credit score.

Pluses and minuses of credit card debt consolidation

Falling behind on credit card debt is a growing problem, especially for "millennials" who use them to pay for living expenses that are not covered by their paychecks. More consumers are using credit card debt consolidation to pay off their unpaid credit card bills. But, this should be carefully considered.

Under this approach, various companies review a person's credit and, if they are eligible, will give them a consolidation loan to pay off their credit cards. The consumer then repays the company for the loan. Some consolidation companies will also engage in debt settlement and negotiate with credit card companies for a smaller payoff balance. This option is available for consumers who suffer financial problems that do not comply with the credit score requirements guiding debt consolidation.

A possible solution for medical debt

Medical expenses can be crippling. But, there are several ways to deal with medical debt. Ignoring bills can only make the problem worse. Health care providers will collect on bills for a few months before the account is turned over to a collection agency. When that occurs, the debt is placed on credit reports, which can impair a person's ability to borrow money. There may be lawsuits which could lead to a judgment, wage garnishment or bank levy.

An explanation of benefits, which is not a bill, should be reviewed carefully. An "EOB" identifies what has been paid by insurance and gives notice on bills that may come soon. Likewise, bills should be closely scrutinized. Assure that the doctor's office billed the insurance company correctly and follow up with the insurance company if a bill was appropriately paid.

Avoiding insurmountable credit card debt

Credit card bills require payment of the underlying purchase, along with interest at rates which may exceed the combined interest for mortgages, vehicle loans and student loans. Debt consolidation is one strategy that can help prevent unreasonable credit card debt that can lead to bankruptcy or loss of property.

A personal loan or credit card consolidation loan can be used to consolidate debt. It can lower interest rates and allow predictable monthly payments. Existing debt can be consolidated into an unsecured personal loan that is usually repayable in two to seven years. Lenders usually approve loan amounts of $1,000 to $100,000.

What's going to happen to your property during bankruptcy?

Making the choice to file for bankruptcy is not easy. If you are considering this choice, it is probably because you find yourself in a place where you can no longer manage your debt and financial obligations on your own. This is a tough choice to make, and one thing that may be holding you back is concern about your personal property.

You may have a clear need to seek bankruptcy protection, but you may not be sure what that will look like for your daily life. In fact, you may worry that you will lose or have to surrender all of your stuff. In reality, you will probably be able to keep many of the things that are most important to you. There are certain property exemptions available to those who file for Chapter 7 bankruptcy.

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Mark T. Young & Associates
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Hixson, TN 37343

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