DebtStoppers USA Bankruptcy Blog

By most media reports, the Great Recession is officially over. But that doesn't mean it's done affecting consumers - especially those in a particular age group.

According to a recent report, Generation X could be haunted by debts accumulated during the downturn well into retirement.

While income and consumer confidence are on the rise, it could take decades for savings funds to recover from the blow they took during recent tough economic times.

Baby boomers born between 1946 and 1955, for instance, lost 28 percent of their median net worth between 2007 and 2010. Later boomers, or those born between '56 and '65, lost an estimated 25 percent during that time.

But Generation X has them all beat: Folks born between 1966 and 1975 lost a whopping 45 percent of their wealth.

Worst of all, those in their 30s and 40s had the least amount of savings to begin with. That may be because they're the most likely group to be grappling with expenses such as house payments, raising a family, old school loans and credit card debt.

Part of the problem is that Gen X wasn't exactly in great financial shape prior to the recession, with far less wealth than previous generations had at the same age. In fact, the average Gen-X consumer currently has $80,000 in debt.

Financial experts advise that retirement savings should replace 70 to 100 percent of pre-retirement income. If Gen-Xers keep saving at their current rate, most will only be able to replace 50 percent of their paycheck.

But all hope is not lost. Remember, we're talking about the average consumer here - not every consumer.

The average consumer is buried in debt. The average consumer is drowning in student loans. The average consumer has more mortgage than she can afford and is facing foreclosure. In short, the average consumer has way too much debt. But it doesn't have to be that way.

Our DebtStoppers bankruptcy lawyers have helped thousands of consumers overcome overwhelming debts to find financial independence now and into the future.

A Chapter 7 or Chapter 13 bankruptcy plan has the power to eliminate debt - and, along with it, stress, anxiety and obligations.

By simply dealing with debt, it's possible for most folks to rise above financial troubles to achieve a financially stable future.

All too often, people accept debt as a fact of life because they feel powerless to fix their financial problems. Bankruptcy puts power back into the hands of consumers. And as so many of our clients already know, there aren't many things more empowering than finally breaking free from debt.

Continue reading "Great Recession May Have Long-Term Effects on Finances of Gen-Xers" »

Credit card judgments are like ticking time bombs: You never know when they're going to go off.

For many consumers, bankruptcy is the best way to diffuse this potentially disastrous situation.

As consumer debts grow, more lenders are choosing to obtain judgments against defaulting borrowers.

With a judgment, lenders and their bill collectors are granted the legal ability to garnish wages or seize property.

In most states, a judgment remains enforceable for up to 10 years. That means that your lender can decide to execute a judgment at any time. If you have a judgment on your credit report, you'll always be at risk - and the odds of legal action only increase with time.

Since it costs money for lenders to obtain a judgment, you can bet they won't want to squander additional dollars to have an existing judgment renewed. If you've had a judgment against you for a while now, there's a good chance debt collectors are preparing to take action soon.

Of course, the simplest way to protect yourself is to pay down debt. If possible, contact your creditor and either agree to make payments or attempt to negotiate a settlement. Make sure to get your agreement in writing before you pay a dime.

For many folks, however, making payments is easier said than done. If credit card debts have spiraled out of control, it may not be feasible to get current without help.

But just because you can't afford to pay your delinquent debts doesn't mean you can ignore them. Living in denial doesn't just prolong your financial problems; it actually worsens them as late fees, high interest rates and legal actions accumulate.

Unpaid debts have a way of touching nearly every area of your life. Whether it's finding a job, getting a loan, or holding your family together, your success may hinge on how you handle your financial obligations.

By filing for bankruptcy, you can prevent a creditor from executing a judgment - and wipe out the debt that put you at risk for legal action in the first place.

If you can't afford to pay your debts, how will you manage to get by when creditors start seizing your hard-earned money? Bankruptcy protects your paycheck from wage garnishment and saves you the embarrassment of giving your employer a glimpse into your private financial life.

The only thing certain about debt is that it will never go away on its own. Bankruptcy has the power to protect your privacy and possessions, stop creditor harassment and start you down the path to financial freedom, once and for all.

Continue reading "Can Filing for Bankruptcy Stop Creditor Judgments for Credit Card Debt?" »

When you're falling behind on your mortgage payments, the chance to change the terms on your loan via a mortgage modification can sound almost too good to be true.

Unfortunately, it often is.

Loan modifications have gained notoriety in recent years, as lawmakers have tried to encourage them as a solution for struggling homeowners with programs like the Home Affordable Modification Program (HAMP).

In a best case scenario, a mortgage lender will agree to a loan modification with a trial payment period. If the trial is successful, the homeowner may enjoy permanently lowered payments thanks to their new terms.

For most homeowners, however, loan modifications aren't the dream come true that lawmakers have made them out to be.

Qualifying Is a Challenge

The reality is that lenders have little incentive to offer modifications.

Since they can make more money off late fees as homeowners approach foreclosure, lenders are usually in no rush to process loan modification applications - leaving stressed-out homeowners in limbo for months. Meanwhile, lenders may be moving forward with foreclosure.

It's not uncommon for homeowners to lose their properties to foreclosure after being denied - or before being approved - for a modification.

When you're headed toward foreclosure, time is of the essence. If you don't act quickly you will lose your home and any equity you have paid into it. That's why Chapter 13 bankruptcy is often a better solution for families facing foreclosure in the near future.

Terms Aren't Always Better

Normally when you're seeking a loan, you can shop around for the best terms. But Uncle Sam requires that homeowners receive a loan modification from their own lender or from a preferred counselor.

Often times, these terms aren't significantly better than your current mortgage. Once you factor in the cost of receiving a modification, back interest that may be added back into the loan, and damage to your credit as a result of the modification, you could end up paying more per month than you do now.

Modifications May Not Stop Foreclosure

Even if you qualify for modification - and even if your new terms are an improvement over your old ones - you may still end up in foreclosure. Why? Because mortgage modification fails to address the underlying cause of most folks' financial troubles.

Mortgage payments are rarely the reason for default; other household debts, namely credit card debt, are usually the culprit.

If you're struggling with snowballing credit card debt, slightly lower mortgage payments won't offer relief for long. Until you deal with debt, your home will always be at risk.

Unlike modification, Chapter 13 bankruptcy has the ability to restructure unsecured debt into manageable payments, providing the breathing room necessary for homeowners to prioritize their mortgage.

Additionally, filing for Chapter 13 enacts an automatic stay that legally protects your home from foreclosure and other assets from repossession. And while many worry that bankruptcy will hurt credit, it's usually just the opposite.

Reorganizing debt and creating manageable mortgage payments allows you to get back on track, so you can begin rebuilding credit - and your financial future.

Continue reading "Loan Modification vs. Bankruptcy: Which Is the Best Way to Stop Foreclosure?" »

Debt has a tendency to sneak up on you.

You open a new credit card account and tell yourself you'll pay off the balance each month. You raid your 401k and promise yourself you'll pay it back when you get that windfall you've been waiting for. You make a late payment or find yourself taking out a payday loan "just this once."

Individually, these financial decisions may seem pretty harmless. But the problem is that they can add up quickly - and the trouble they cause has a way of multiplying.

Before you know it, you're paying late fees, bank penalties and higher interest rates on top of your existing debt. Throw in some unexpected hardships - say, car repairs, medical costs or job loss - and pretty soon you're swimming in a swell of debts threatening to pull you under. Sound familiar?

When debt has spiraled far beyond your control, personal bankruptcy is often the fastest and most effective way to regain power over your finances. Filing for Chapter 7 bankruptcy can eliminate unsecured debts entirely. Chapter 13 bankruptcy can reduce debt, set up a realistic payment schedule for remaining debts, and stop foreclosure.

Of course, if you can recognize that you're on track for financial disaster early on, it may be possible to reverse course before drastic measures like bankruptcy are needed.

Here are some signs you're headed for a financial meltdown.

Late payments have become the norm

When you're low on funds, it can be tempting to put off a payment. After all, you can just get current again next month, right? Unfortunately, it's never as easy as it sounds.

If you're struggling to pay a bill this month, how will you manage next month when your bill includes a hefty late fee? One missed payment can quickly turn into two or three - and soon enough your credit score plummets and your interest rate jumps. But the biggest concern about missed payments is what they denote: that your debts are running your life.

You're juggling credit cards

Credit cards can come in handy when you need to build credit or make a purchase without cash. But plastic goes from helpful to harmful fast when you start relying on credit cards to make purchases with money you don't have.

If you're unable to pay off your balance in full, it's a sign you have more credit card debt than you can manage. Making minimum payments allows debt to grow unchecked, even if you stop using your card - leading to larger minimums and higher rates. If you're paying the smallest amount possible or transferring your balance to new cards, you're only putting off the inevitable. All it takes is one costly month to completely derail your finances.

Your finances are straining your relationships

It's normal to occasionally disagree about debt. But when you're constantly fighting over money, it's a sign you're living beyond your means.

Financial stress takes a toll on every aspect of your life. When you worry every phone call could be a bill collector and you're never sure if you'll be able to afford your next payment, you're living in a state of fear and instability that can impact performance at work, your relationships with family and even how you feel about yourself.

There's a reason having too much debt is a top cause of both depression and divorce. Bankruptcy can not only help you regain control of your finances; it can help you regain your relationships and your sanity.

You're paying overdraft fees

Everyone makes mistakes now and then. But if you're consistently overdrawing on your checking account, it's a sure sign your expenses are out of line with your income.

When you're teetering on the brink of being broke, overdraft fees are often the last straw. If you find yourself unable to stay in the black, filing for bankruptcy can stop fees from accumulating and provide the breathing room you need to build up a cash cushion.

You're not saving money

Saving is the key to financial freedom. Maintaining a stash of savings will keep you afloat amid a financial emergency and ensure that you can actually afford to retire. Yet savings is one of the first places people cut when money gets tight.

If you're not setting any of your paycheck aside - or, worse, if you're robbing your own retirement funds - your debt is setting you up for financial ruin. Getting rid of debt with bankruptcy can free up more money for today and for the future.

The earlier you recognize your finances are in trouble, the easier it will be to make the changes necessary to get yourself back on track. But if you're in over your head, there's no shame in asking for help. When debt is disrupting your life, bankruptcy can be your ticket back to financial stability - and peace of mind.

Continue reading "Do You Have Too Much Debt? 5 Signs You Need Help Relieving Your Debt Burden" »

Several years into a slow but steady economic recovery, student loan debt is threatening to wipe away any gains.

As our bankruptcy lawyers discussed last week, the investor-led housing recovery could stall as investors pull back and ordinary home buyers fail to step in because they're grappling with massive student debts.

With the average student debt load topping $25,000 - and many grads paying off debt in the hundreds of thousands of dollars - it's normal for folks to have education loan bills as high as a typical mortgage payment.

According to a new study by Trulia.com, these borrowers are starting to put a damper on the fragile recovery.

In the past, college graduates have been more likely to buy homes and cars than those without degrees because they typically earned more money and could thus afford them.

But these days, people with student debt are less likely to take out car loans and mortgages, as large portions of their paychecks are earmarked for debt - making it difficult to save for a down payment or qualify for a home loan.

And the problem could get worse as the percentage of young adults with student debt grows. Since 2003 - just ten years ago - the portion of 25-year-olds with debt from education loans increased from 25 percent to 43 percent.

As more borrowers default on their student loans, the Consumer Financial Protection Bureau is seeking solutions for making repayment easier - particularly for those with private student loans, which have fewer repayment options than federal loans.

Strategies could include income-based repayment, in which payments are made based on earnings rather than what's owed, and loan refinancing.

Even lowering payments for just a few years could offer enough relief to allow borrowers to catch up or find a financially-stable job, say experts.

One of the biggest problems with student debt has been the unavailability of bankruptcy. While filing for bankruptcy can relieve other unsecured debts like credit card debt and medical bills, student loan debts are rarely discharged.

But while bankruptcy can't directly eliminate student debt, it can still provide a solution. Keep in mind that, along with education loan payments, today's young consumers are also struggling with credit card debt and high rates of unemployment and underemployment.

Chapter 7 bankruptcy can wipe out many unsecured debts in as little as a few months, drastically reducing monthly payments and freeing up the money to get current on student loans.

If the recovery is going to be sustainable, we need to make it easier for borrowers to manage student debt payments. But until then, bankruptcy can be the most realistic way to buy time - and money.

Continue reading "As Student Loan Debt Drags Down Economy, Consumer Group Pushes for Repayment Reform " »

Home prices are rising, foreclosures are falling and consumers are snatching up properties: It looks like the housing market is on the mend. But all is not as it seems, say bankruptcy attorneys.

Recently, real estate experts have been speculating that the real estate recovery won't last.

According to CNN Money, there are three main reasons the market comeback could be in jeopardy.

Investors

Homes are selling, but it's not homeowners who are doing the buying.

The majority of properties are being purchased by investors taking advantage of low mortgage rates and home prices. As a result of this surge in demand, home values and interest rates are being driven up.

Meanwhile, low- and middle-income consumers looking to buy a primary residence will be unable to afford a mortgage. Sound familiar? It's similar to what caused the original housing bubble.

As prices rise, investors will likely pull back, reducing - and maybe even reversing - any gains.

Economy

It used to be that housing threatened the economy; these days, the economy seems to be threatening housing.

After making gains, the job market is slowing down. Recently it was announced that half a million workers withdrew from the job market, either because they gave up on finding work or opted to retire and thus stopped collecting unemployment.

Student debt is on the rise and, while the number of families with credit card debt has decreased, those with debt have more than ever.

With smaller paychecks and more expenses, it's becoming increasingly difficult for first-time homebuyers to finance a purchase. Those with homes are unlikely to upgrade because, often times, they're struggling to keep up with their current mortgage payments.

The good news is that, while bankruptcy can't help the economy, it can help consumers.

Filing for bankruptcy can eliminate debts and help potential homeowners improve credit and the possibility of qualifying for a loan. And if you're struggling to hold onto a home you already own, Chapter 13 bankruptcy can stop foreclosure.

Cuts

As if the situation isn't bad enough, the $85 billion in spending cuts from the sequestration will peak this summer.

On top of additional job losses, these cuts include the expiration of payroll tax cuts and unpaid days off for more than one million government employees.

It may be enough to bust the already-tight budgets of the many U.S. homeowners struggling to make mortgage payments - leading to more foreclosures, falling prices and the same cycle all over again.

Just when we think things are getting better, the economy throws a curve ball. The reality is that the market will always be up and down. It's up to us as individuals to improve our personal financial situations.

Taking action by filing for bankruptcy has the ability to relieve debt and make payments more manageable, resulting in improved credit, reduced risk of foreclosure and better loan terms. So no matter what happens to housing, your family is protected.

Continue reading "Experts Caution Real Estate Recovery May Not Have Strength to Last" »

Could the foreclosure crisis officially be over? Foreclosure filings in the first quarter of 2013 fell to the lowest level since 2007, according to new data from RealtyTrac.

This March, banks took ownership of 44,000 homes. While it may sound like a lot, compare that with September 2010, when banks repossessed more than 100,000 properties.

Foreclosure activity has slowly started to decline in recent years for several reasons.

For instance, more homeowners are turning to foreclosure alternatives such as short sales - or are avoiding the loss of their homes entirely by filing for Chapter 13 bankruptcy, which stops foreclosure proceedings.

The surge of foreclosures that occurred when banks resumed processing paperwork following the robo-signing scandal has mostly subsided.

Even the reasons for foreclosures have changed.

At the height of the housing bust, homeowners were defaulting due to plummeting home prices and outrageous mortgage terms. These days, most folks losing their homes to foreclosure are struggling with non-mortgage financial troubles - say, a job loss, illness or divorce.

Of course, having too much credit card debt is still a leading cause of mortgage default for everyone from low-income families to wealthy households.

But while the foreclosure drop-off is good news for homeowners in most parts of the country, there are still a few states buried under a backlog of foreclosures. Foreclosures in Georgia, Illinois and Florida are higher than in any other state.

Even more bad news: Many foreclosures in these states are being dismissed because banks aren't ready to proceed with their cases. However, this gives homeowners false hope, as dismissed cases can be reopened at any time.

In some cases, homeowners have fallen in and out of foreclosure two or three times, ultimately losing their home - in addition to dollars lost dealing with the process.

If you're at risk for foreclosure, it's never too soon to protect your home. When you file for Chapter 13, a legal action called an automatic stay has the power to stop foreclosure proceedings while you pay off debts over a manageable timeframe.

If lack of income requires you to file for Chapter 7 bankruptcy, it may still be possible to avoid foreclosure. Meanwhile, you can eliminate most crippling unsecured debts, such as credit card debt and medical bills.

The tide of foreclosures is turning, but there are many factors that still put homeowners at risk. With bankruptcy, you can protect against foreclosure while relieving debt and improving your family's finances - a win-win any way you slice it.

Continue reading "Foreclosures Dwindle to Pre-Housing Crisis Levels" »

Filing for bankruptcy isn't something to be taken lightly, but the consequences are not as dire as most consumers think.

While many folks worry bankruptcy will be the end of their financial freedom, it could actually be a new beginning. Take unsecured credit offers, for example.

It's a commonly held belief that it will be difficult to impossible to get a credit card after bankruptcy. But as a recent Bankrate.com column points out, a bankruptcy discharge can, in some ways, make you more appealing to creditors.

If you qualify for Chapter 7 bankruptcy, your debts could be eliminated entirely within a matter of months. With no debt, you're an ideal candidate for new credit cards.

Furthermore, creditors know that it will be eight years before you're eligible for another debt discharge through Chapter 7 - and you're unlikely to file again anyway, as most people who go through bankruptcy only do so once in their lifetime.

Consider it bankruptcy's hidden benefit: In many cases, receiving a bankruptcy discharge can actually improve credit.

That's not to say bankruptcy comes without drawbacks.

Yes, when you file, the bankruptcy will appear on your credit report for the next 10 years. And yes, if you have a history of bad credit, the credit card offers you receive initially will probably come with high interest rates, low credit limits and other less-than-stellar terms.

But look at it this way. Bankruptcy provides a fresh financial start, so in theory you won't need to be reliant on your new credit card anyway. When you use plastic only occasionally and make sure to pay your balance each month, you won't have to worry about a low limit or sky-high interest.

Instead of focusing on the best offer, focus on the one that will allow you to most quickly reestablish good credit, such as a secured card, says Bankrate.com. A card from a bank or credit union may come with fewer perks than one from a finance company, but will be viewed more favorably by lenders - and that's what counts.

The sooner you begin reestablishing credit after bankruptcy, the sooner lenders will trust you enough to consider you for a mortgage, car loan, or better credit card.

With responsible financial behavior, your life after bankruptcy can become more financially rewarding than you could have imagined.

Continue reading "Getting Credit Cards After Bankruptcy Easier Than Most Consumers Think" »

The good news is that fewer Americans are in debt. The bad news? Those of us with debts owe more than ever.

According to new Census Bureau data, the percentage of U.S. households with debt fell to 69 percent in 2011 from 74 percent in 2000.

However, households that did carry debt owed 40 percent more than in 2000, with the median debt load increasing to $70,000 from $50,971.

When consumers were isolated by age, those over 65 fared the worst. With a median debt of $26,000, today's seniors owe twice as much as they did a decade ago.

While the number of consumers with credit card debt hasn't grown, the percentage with other forms of unsecured debt - from medical expenses to student loans - has risen by 11 percent.

For seniors, these debts are often a result of helping children and grandchildren with school costs, job loss and housing expenses while struggling to pay their own bills, which may include an underwater mortgage.

To make matters worse, many are dealing with shrinking incomes and plummeting pensions. It's no wonder seniors are the fastest growing group of consumers filing for Chapter 7 or Chapter 13 bankruptcy.

Regardless of age, having too much debt takes a toll on your finances, your family and your emotions.

Many folks put off filing until they have no other options because they fear that by declaring bankruptcy, they'll be declaring failure. On the contrary, bankruptcy can provide consumers with a fresh start. Choosing to take action to improve your financial situation is a sign of achievement, not surrender.

Over time, growing debts lead to wrecked credit, mounting late fees and harassment from bill collectors. In a worst case scenario, you can also lose your home to foreclosure and other assets to repossession.

Chapter 13 bankruptcy prevents foreclosure while making it feasible to slowly pay off debt over a period of three to five years. Chapter 7 bankruptcy can sometimes eliminate debt in just a few months.

If debts are too large for you to manage, the problem won't solve itself. The sooner you take action, the sooner you can begin to rebuild credit and your financial freedom.

Whether you hope to retire in 20 years or next year, starting with a clean financial slate ensures you'll actually get to enjoy your golden years.

Continue reading "Fewer Consumers in Debt, But Those Who Are Have Fallen Deeper in Debt" »

Traditional credit scoring methods such as FICO have long confused consumers.

On the one hand, carrying too much debt will hurt your score - even if you can manage to pay it off. On the other hand, not having enough debt also leads to a low score.

Now a new credit score system could make things simpler for millions of Americans.

VantageScore 3.0, the newest score used by major credit bureaus Equifax, Experian and TransUnion, could help boost scores for consumers with damaged credit and build credit for those without much credit history.

For instance, folks without major loans such as mortgages, car loans or credit card debt often have low credit scores - or no score at all - as a result of their limited credit usage. The new scoring model will factor other payments such as rent and utility bills and even bankruptcy payments into the picture, improving the ability to build credit.

With FICO, debts that go into collections will appear on a consumer's credit report for seven years, regardless of whether those debts get paid off. VantageScore ignores these accounts once they are paid or settled.

Another problem with traditional scoring methods is their treatment of Americans who have suffered a natural disaster. Previously, victims of a hurricane or flood had their accounts shut down following the catastophe. That way, they couldn't be dinged for missed payments - but they also couldn't benefit from good behaviors, such as paying on time.

In the aftermath of a natural disaster, VantageScore will ignore negative behaviors but continue to track good behaviors, allowing victims to boost their scores - and their chances.

The more logical scoring system could increase opportunities for countless Americans.

Currently, many people avoid effective debt relief solutions such as bankruptcy because they fear their credit scores will take too much of a toll. With VantageScore, consumers can be rewarded for their efforts - not punished for their past.

Of course, even with FICO the effect of bankruptcy on credit is frequently overestimated. Remember, by filing for bankruptcy you have the ability to eliminate debts that led to your bad credit score in the first place.

With your debts wiped clean, your family can finally move forward. Bad credit no longer has to keep you from enjoying financial freedom - and your life.

Continue reading "New Credit Score System Could Improve Credit for Struggling Consumers" »

For thousands of deeply indebted Americans, Chapter 7 bankruptcy has been a saving grace. But thousands more consumers are missing out on the opportunity for a fresh start because they mistakenly believe they can't file for Chapter 7 due to their status as homeowners.

It's a common myth that homeowners must file Chapter 13 bankruptcy while non-homeowners are free to take advantage of Chapter 7, explains a recent Bankrate.com article.

Chapter 13 does have its benefits. Known as reorganization bankruptcy, Chapter 13 bankruptcy provides protection against foreclosure while allowing a borrower to get caught up on mortgage payments or other debts over a period of three to five years.

For those with significant equity in a home, Chapter 13 offers a way to reduce debt - it just takes a while.

But when you're drowning in unsecured debts such as credit card debt, you may not have time to wait years to lower your bills.

Chapter 7, on the other hand, provides much more immediate help.

Credit card debt, medical bills, payday loans, utility bills and other debt not tied to any property can often be discharged in a matter of months. That means in mere weeks you could be free of all obligations to creditors.

Since people who file for Chapter 7 bankruptcy don't have to pay back debt out of pocket, their assets can sometimes be sold to pay off creditors. That's why Chapter 7 is known as liquidation bankruptcy, and why in the past homeowners have been steered toward Chapter 13 bankruptcy instead.

These days, though, many homeowners have little equity in their homes thanks to the recent mortgage crisis. Without much money tied up in a property, there's little reason for it to be repossessed.

In fact, Chapter 7 has earned another nickname in recent years: fresh-start bankruptcy. For homeowners with little equity and loads of unsecured debt, filing Chapter 7 can be the ticket to financial freedom.

Look at Chapter 7 as an upside to being upside-down in your mortgage.

Everyone's financial situation is a little bit different. If you're in over your head in debt, discussing your options with a bankruptcy lawyer can help you discover the most advantageous solution to your financial struggles.

Regardless of whether you qualify for Chapter 7 or Chapter 13, you can look forward to the same end result: With the right bankruptcy plan, you and your family will be well on your way to a debt-free future.

Continue reading "Despite Common Belief, Many Debt Plagued Homeowners Can File for Chapter 7 Bankruptcy" »

Fewer young adults are in debt today than 10 years ago. But as it turns out, that may not be a good thing.

It's not that people in their 20s and 30s have become more financially responsible overnight. Rather, it's that their fiscal behavior over the past decade has finally made it impossible for them to qualify for loans.

While debt increased 63 percent for Americans over 35 between 2001 and 2010, it actually dropped 14 percent for the under-35 crowd, according to a recent survey by the Pew Research Center.

Older consumers already have mortgages, home equity loans and car loans and, as our bankruptcy lawyers discussed in a recent post, their debt load has only increased as they've tacked on new credit card debt. As a result, many baby boomers are facing the possibility of delaying - or eliminating - retirement because they simply can't afford to stop working.

At the other end of the spectrum, young Americans are beginning to suffer the consequences of too little debt.

Younger consumers have credit card debt and, increasingly, student loan debt. What they don't have is so-called "good" debt that can increase in value, like a mortgage or business loan. But when you combine a lot of unsecured debt (i.e. credit card debt) with a weak job market, it's no wonder younger generations are struggling to get loans.

Instead of continuing to add credit card debt, many are choosing to pull back on plastic. Between 2008 and 2012, borrowers between 25 and 34 decreased their credit card debt by half.

While carrying a more manageable debt load can help improve one's credit score, it's only part of the picture. Creditors also want to see that a borrower can make consistent timely payments on a mortgage, car loan or other obligation. Yet only 66 percent of young consumers own at least one car, and just 34 percent own their own home - down from 40 percent in 2007.

For most people, it's better to use plastic responsibly than to not use it at all. Putting a reasonable number of purchases on credit and paying off your balance each month can be a wise way to build credit - so that when you do apply for a loan, you don't get skewered by impossibly high rates.

If limited income combined with too much credit card debt is your problem, however, bankruptcy may be able to help.

In many cases, the reason young consumers are avoiding new debt is that they're already overwhelmed by previous debts. Although bankruptcy can't lower student loans, it can eliminate credit card debt and other expenses that may be interfering with student debt payments.

Chapter 7 bankruptcy is ideal for those with overwhelming bills and expenses, but no major assets like a home to protect. Unlike Chapter 13 bankruptcy, which reorganizes debt into more manageable payments, Chapter 7 has the power to discharge unsecured debt entirely - sometimes in as little as a few months.

Whether you have too little debt or too much debt, making the right moves today can help you achieve financial independence in the future. At DebtStoppers, we can help make your dream of financial freedom a reality.

Continue reading "Without Good Debts, More Young Consumers Unable to Get Loans" »

Falling behind on debt payments is stressful enough as it is. But for all too many borrowers, the situation is made even worse by harassing debt collectors.

Collection agencies are paid by creditors to help persuade delinquent borrowers to pay up. For their work, they often receive a fee or percentage of any repaid debt.

As you might imagine, that gives collection agencies a strong incentive to do anything and everything they can to coerce borrowers into making debt payments - whether those borrowers can afford to pay or not.

Debt collectors are required to follow certain guidelines under the Fair Debt Collection Practices Act. However, with so many Americans defaulting on debts, more and more agencies are shirking the rules and resorting to outright bullying.

A recent article in CNN Money documented some of the worst instances of harassment: threatening to throw debtors in jail, take away their children, do harm to their pets or - in perhaps the most outrageous case - dig up dead relatives who were delinquent on their debts.

In many situations, bill collectors attempt to wear down debtors by calling incessantly at home and even at work. Sometimes they've been known to harass the wrong person about a debt that isn't theirs to begin with.

Often times, debtors are suffering from so much stress and guilt that they don't realize the harassment they are receiving from debt collectors may qualify as abuse. The truth is that collection agencies that don't play by the rules are breaking the law.

Debt collectors are prohibited from inflating debts, posing as attorneys, using offensive language, and threatening any kind of violence. And without a court order, they cannot make threats to garnish wages, repossess property or have a borrower arrested. By law, borrowers are not even required to communicate with collectors.

If you live in fear that every phone call will be another debt collector calling to hassle you about late payments and overdue bills, it may be time to seek outside help.

You may be behind on your debts, but you are still entitled to your rights - and respect - as an American citizen.

If debt collectors are making your life a living hell, bankruptcy can be your saving grace. When you file for bankruptcy, you put a legal stop to collection efforts - and contact with debt collectors.

With the pressure of collection calls lifted, many folks find that it's a lot easier to work out a repayment plan for debts. Whether you're behind on mortgage payments, credit card bills or medical expenses, bankruptcy can give you the time and the flexibility you need to get your family's finances back on track.

Continue reading "For Borrowers Relentlessly Hounded by Debt Collectors, Bankruptcy Can Bring Peace and Quiet" »

More than half of student loans in the U.S. are going unpaid due to financial hardship, according to recent data.

As of last spring, 51 percent of education loans were in deferment or forbearance - periods in which borrowers are able to temporarily delay payments during times of unemployment, underemployment or other financial difficulty.

As opposed to defaulting, deferring payments doesn't damage credit - at least not immediately, say bankruptcy attorneys.

However, as student debt grows, fewer students are able to make payments on their loans - even after they've been given a break through deferment or forbearance.

In most cases, interest continues to accrue while payment is on hold, resulting in a larger debt when it's time to begin paying.

When many college grads finally begin repaying debts, they're usually dealing with a growing set of bills related to "real world" costs like home ownership, personal loans, and the expense of raising a family.

It seems that the program intended to offer relief to borrowers may only end up making their situation worse.

Federal loans, which allow for the longest period of nonpayment - up to eight years compared to the one year offered by private loans - also have the highest rate of deferment.

And more borrowers across the board are choosing to put off repayment. Between 2007 and 2012, the amount of debt borrowers postponed paying increased by 70 percent.

Instead of delaying the inevitable - and, in many cases, only making things more difficult - borrowers may be better off seeking ways to lower their overall expenses each month.

By, say, reducing credit card debt and mortgage payments, consumers can free up more funds to budget toward repaying student debt.

While bankruptcy can't usually eliminate education loans, it can relieve the pressure of those loans by tackling many other common financial burdens - things like credit card debt, medical expenses and mortgage debt.

If your financial situation has you struggling to keep your home, Chapter 13 bankruptcy even has the power to stop foreclosure.

A college education is supposed to help you move forward, not hold you back. If your debts are holding you hostage, bankruptcy can be the most effective way to break free.

Continue reading "As College Costs Rise, More Borrowers Delay Student Loan Payments on Growing Debts" »

U.S. consumers had more money in their pockets this year. Unfortunately, those fatter wallets may not last long.

The household debt service ratio, which looks at the amount of mortgage and consumer debt in relation to disposable personal income, fell to its lowest level since 1983 - nearly 30 years ago - in the third quarter of 2012, according to the Federal Reserve.

U.S. household debt reached its highest point during 2007, as consumers took on home equity loans and other debts.

Since then, credit card debt has risen as borrowers struggled to pay down unaffordable mortgages on homes that were now underwater.

The news should mean that consumers will have more money to spend, giving the economy a much-needed boost in 2013. Right now, though, the looming fiscal cliff stands in the way.

According to the Tax Policy Center, nearly 90 percent of households would be impacted if a deal isn't reached by Jan. 1. But with just days left until dozens of tax cuts expire and spending cuts take effect, lawmakers are still bickering over what to do.

What happens if they are unable to agree on a deal? Here's a taste.

Payroll taxes would rise by 2 percent as a temporary tax cut expires. Income taxes would go up across the board. Over 2 million out-of-work Americans could lose unemployment benefits.

Most significantly for families facing foreclosure, the Mortgage Forgiveness Debt Relief Act of 2007 - also known as the mortgage tax break - would expire.

As our bankruptcy attorneys have pointed out, that means homeowners will owe income taxes on the amount of their mortgage forgiven by lenders in a foreclosure, principal reduction or short sale. In other words, if you owe $200,000 and your house goes for $150,000 in a short sale or foreclosure auction, you're on the hook for taxes on that $50,000 gap.

Additionally, lower debt levels aren't always a good thing. Some debts - such as mortgages and car loans (when you can afford them, of course) - help improve personal credit and grow the economy through demand for loans.

But right now, many Americans are resistant to or unable to take on new debt, choosing to rent instead of own and to continue driving the same vehicles.

When it comes to debt, it's all about balance. In a perfect world you'd be free of overwhelming and unnecessary debts - such as credit card debt - that hurt your credit score and impact your ability to keep up on your mortgage and pay your tax bill.

However, you'd also be able to qualify for a home loan with decent rates and a credit card for emergencies.

For millions of Americans, bankruptcy can turn that dream of financial freedom into reality.

Whether you're behind on mortgage payments and facing foreclosure, drowning in credit card debt, or buried under a mountain of medical bills, the right bankruptcy plan can grant a clean slate by reducing or eliminating debt.

Whether or not we go over the fiscal cliff is up to lawmakers. But it's up to us to take steps to protect our family finances, regardless of the decision in Washington. If debt has been a thorn in your side for far too long, bankruptcy can be the relief you need.

Continue reading "Household Debt Hits New Low, But Expiring Tax Cuts Could Obliterate Savings" »