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Redwood City California Bankruptcy Law Blog

Bankruptcy doesn't have to be a financial death knell

According to a report from Lending Tree, California residents who file for bankruptcy may be able to rebound from it relatively quickly. The report indicates that about 40 percent of Americans have a credit score of 640 within a year of filing. That improves to 65 percent within three years of filing. Having a good credit score is one of the most important attributes to have when applying for a mortgage after a bankruptcy.

Those who had a credit score of at least 720 three years after bankruptcy were offered home loans at rates similar to those who hadn't filed. The key to repairing a credit score after bankruptcy is to have a plan. Part of it should be to obtain gas or retail credit cards that are easy to repay. In fact, it may be beneficial to apply for credit cards and not use them at all.

Tips for better handling debt

In the first quarter of 2018, California residents and Americans throughout the country owed a total of $13.21 trillion in debt. Of this total, $1.41 trillion was in the form of student loans while they owed another $815 billion in credit card debt. For those who are interested in paying down their balances, the first step is to learn more about the balances that they owe.

For example, debtors should know the interest rate on a loan, whether it can change and how long the loan will take to repay. It is also important to know how often the interest on a balance will compound. Depending on the type of debt a person has, it may be possible to discharge it through bankruptcy. This may be ideal for those who only paying the interest on a loan or are otherwise struggling to reduce their principal balance.

Data shows more debt for women than men

Women in California might be in greater danger of falling into debt than men. According to data from Comet Financial, the economic disparity between men and women is not just about wages. Women have more debt than men do as well, and that wage gap may be one significant reason this is the case. On average, women have more than $6,000 in student loan debt compared to men and more than $1,000 in credit card debt and medical debt.

Debt can be costly in terms of interest, but there are several steps people can take to reduce debt. Financial experts often recommend starting with the debts that charge the highest interest rate.

Make sure you're eligible before filing for Chapter 7 bankruptcy

Perhaps you've been struggling for quite some time now to restore financial stability after things got a bit off track. Maybe you had some unexpected medical bills, lost a job or encountered any number of challenges that cause many California residents to experience money problems. The good news is that your problems are likely temporary, as most financial troubles are.

If you're already a step ahead because you've made a decision to file for Chapter 7 bankruptcy, you'll want to make sure you are eligible for proceeding any further. If it turns out you're not, do not despair. There are other types of bankruptcy that may better fit your needs. By researching the qualifications you need to meet before applying and by knowing where to seek support, you lay the groundwork for solid solutions and hope for a stronger financial future.

Credit card marketing and payday loans contribute to runaway debt

Many consumers in California recognize that a crisis like a job loss or medical emergency can force someone to borrow money. Credit card marketing and the temptation of payday loans represent two more forces that can push people into taking on debts that they cannot repay.

Credit card issuers entice people to make purchases with rewards programs and zero percent interest balance transfer offers. For consumers who have the funds to charge purchases for the purpose of earning reward points, the program presents little danger of driving someone into debt. Trouble arises, however, when people plan to pay off a credit card but then an emergency prevents them from making the full payment. Interest charges result and erase any benefits enabled by rewards. In some situations, switching a high-interest debt to an account with a zero percent introductory offer makes sense. When people take this route, they should avoid charging any new purchases on the card even during a no-interest period. New purchases will drive up the balance that will become exposed to interest charges in the near future.

Bankruptcy may soon include the option to discharge student debt

Bankruptcy doesn't always exclude student loan debt, but under certain conditions, it may be available as dischargeable to Chapter 13 filers in California and elsewhere. There seems to be an increased sentiment among many in the judiciary to make relief from often crippling student loan debt more available to a broader spectrum of the general public than the current laws permit.

According to personal finance experts, student debt has surpassed credit card debt as the second leading consumer debt category, behind only mortgage debt. It is not clear why student debt has been almost uniquely singled out as exempt from Chapter 13 bankruptcy, but beginning in 1976, it has been under congressional scrutiny. Before then, it was dischargeable, and the ability to discharge it has become progressively less available to the vast majority of debtors.

Why individuals should reexamine their credit card use

California residents may choose to get rid of their credit cards after paying down an existing debt balance. However, that may not be a wise choice. By getting rid of a credit card, holders may harm their credit score. This is because they will now have less credit to use and may also reduce their credit mix. These are both key factors when calculating a credit score.

For those who have good credit, it may be possible to acquire a credit card that offers rewards points or other perks. These perks may include statement credits or the ability to transfer money to a bank account. It may also make it possible for an individual to collect gift cards or other items that can help reduce travel or household expenses. Credit cards may come with an introductory interest rate of 0 percent.

Does bankruptcy always ruin a credit score?

When it comes to financial topics, there is one that tends to be a bit controversial, meaning it has a negative stigma attached and therefore leads people to think it is a bad thing. That topic is bankruptcy. The truth of the matter is that there are several types of bankruptcy, and if you are facing a serious financial crisis, one of those types may be a viable option, not only to help you obtain debt relief but to lay the groundwork for a stronger financial future as well. 

So, how do you know? How can you tell if bankruptcy would totally ruin your credit score (as you might have heard it would) or if, instead, it might actually be a first logical step to take to get your head back above water and move toward restored financial stability? The answer lies in learning as much as you can about the various types of bankruptcy and also in knowing where to seek support from someone well-versed in bankruptcy laws and facts.  

More Americans carrying credit card balances

Credit card debt nationwide is on the rise overall, but the average debt is declining. More people in California and across the U.S. are carrying credit card balances. According to data gathered by the Federal Reserve, 38.1 percent of Americans had balances on their credit cards in 2013; that number rose to 43.9 percent by 2016.

The two groups of people who carry the largest credit card balances, according to ValuePenguin, are the wealthiest and the poorest Americans. The average outstanding credit card debt for households that had negative or zero net worth was $10,307. It makes sense because the people are likely forced to rely on the credit cards to pay their bills or cover expenses at times.The wealthiest households, too, tended to carry larger credit card balances. Those whose net worth was at least $500,000 carried an average debt on their credit cards of $8,139, the second-highest of the groups studied.

Medical debt increasingly in collections, on credit reports

A recent study of more than 4 million anonymous credit reports found that 16 percent of them had listings for medical bills that were in collections. More than 2 percent of adults had medical debts of less than $200 that were submitted to collections companies. Furthermore, over half of the medical collections for the year studied, 2016, were for amounts less than $600. The study shows how medical collections are hurting people's credit in California and across the United States.

Medical bills are often sent to collections agencies after the patient fails to pay the bill for a certain period of time. The patient's credit rating suffers and he or she must deal with phone calls from creditors. According to the recent study, individuals in their late 20s are the most likely to have medical bills in collections -- three times as likely as people in their late 60s. People in their 60s are more likely to need medical care, but they are also eligible for Medicare, which covers many medical expenses.