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Columbia SC Bankruptcy Law Blog

When bankruptcy is the best option

South Carolina residents may find themselves with significant debt because of a medical issue or poor money management skills. In most cases, the only way to overcome that debt is to make a large sum of money quickly. However, if that is not a realistic option, it may be possible to file for bankruptcy. In 2016, roughly 800,000 people filed for protection from creditors.

It is important to note that a bankruptcy may remain on a person's credit report for up to 10 years. This may make it more difficult to obtain a home or apartment, obtain insurance or even get a job if an employer runs a credit check. Furthermore, bankruptcy may not prevent those who have trouble managing their money from finding themselves deep in debt again in the future. People who are considering filing are urged to see a credit counselor before doing so.

Low bankruptcy filing rates could indicate trouble

Although some South Carolina residents have struggled through challenging economic times in recent years, they may be encouraged by economic news showing that bankruptcy filings have diminished, reaching their lowest levels across the country for the last 10 years. However, there could be indicators that filings will climb again in the near future based on the data recorded for the most recent year. Statistics show that the one-year decline for the period ending in September of 2017 was the lowest annual decrease in bankruptcy filings for the last 10 years.

Financial difficulty at large can be measured in one respect by the number of bankruptcy filings in a period of time. However, experts use other measures to evaluate the economic well-being of the nation as well. Another factor to consider related to bankruptcy is the rate of increase or decrease in filings. As the rate of decline slows, there is a risk of the trend changing directions. Another mitigating factor that is notable is the potential for interest rates to increase. This could similarly impact the financial health of individuals, which could translate into an increase in bankruptcy cases.

Changing debt limits for Chapter 13

Debtors in South Carolina who are considering legal options to resolve their substantial debt may be interested to know that there are calls for the debt limits for Chapter 13 bankruptcy to be modified or eliminated. If such a change were to be made, it would impact individuals who do not qualify for Chapter 13 with its current limits and for whom filing for Chapter 11 would be too expensive.

Chapter 13 bankruptcy allows individuals with a steady stream of income to get relief from debt while retaining ownership of their property. Debtors are required to submit a three-to-five-year payment plan that shows how future income would be used to pay a portion or all of their debt.

Easy tips to get out of debt

A Northwestern Mutual survey of 2,700 people over the age of 18 revealed that about 75 percent of the respondents struggled with debt. Furthermore, 40 percent said that debt was a cause of stress. The average amount of debt that they carried was $37,000 not considering mortgages. About half carried at least $25,000 in debt. Despite that, many people still make nonessential purchases that may make it harder to pay down what they currently owe.

One of the best ways to start paying down an outstanding balance is to acknowledge it and not feel guilty about it. In some cases, simply talking about the problem may make it easier to deal with. However, before people can start paying down a debt, it is critical to know what kind of balances that they may have. Ideally, a debtor will know the balances, interest rate and repayment terms of each obligation.

Is debt consolidation a good idea?

Many South Carolina residents have debts, and some of them struggle to repay them. Debt consolidation may offer a way for people to repay their obligations at a lower interest rate, but it is not a good idea in certain cases.

Debt consolidation occurs when people have multiple debts that they are repaying with different interest rates and to different companies. They consolidate all of their debts into a single loan at a lower interest rate and pay it off so that they can be free from debt. This is a good method to use for people who are able to get approved for zero percent interest credit cards or low-interest personal loans and whose debts are less than 50 percent of their total incomes.

Common errors debtors make

Data from Wallethub indicates that consumers in South Carolina and around the country may be extending themselves too far into credit card debt. With the possible of interest rates rising in the future, individuals could be paying hundreds of dollars in extra interest payments each month. One reason why Americans are in debt is because they fail to understand the root cause of it.

In many cases, people who lose a job or put an unexpected expense on a credit card don't have an emergency fund. Ideally, those who are using credit cards to finance their lifestyle will learn how to spend less than they make and put the rest into such a fund. It may also be difficult to pay off a credit card when it is still being used for new purchases. People may try this in an attempt to get airline miles or to take advantage of other perks such as a low interest rate on purchases.

Older Americans carry credit card debt longer

Consumers in South Carolina and around the country charged more than they have since the early days of the Great Recession in 2016 and added $87.2 billion in credit card debt, and a study released on Sept. 11 by the personal finance website Wallethub.com predicts that total credit card obligations in the United States will surpass $1 trillion by the end of the year. Rising interest rates could make this debt expensive to pay off as another sobering study released by Creditcards.com suggests that most Americans carry revolving debt for two years or longer.

While spiraling credit card debt is often seen as a problem mainly affecting young people who are struggling to meet their financial obligations as they begin their careers and start families, the Creditcard.com report reveals that it is actually older Americans who are likely to take longer to pay their credit cards off. Baby boomers were the most likely demographic group to allow their revolving debt to linger, but people in their 70s are not not far behind.

Housing during Chapter 13

South Carolina consumers sometimes find themselves overwhelmed by their financial obligations. When other debt relief efforts fail, filing for bankruptcy may be the best option for obtaining a fresh financial start. One concern for many people in Chapter 13 bankruptcy is whether they will be able to purchase or rent a new home.

There is good reason for this concern. During a Chapter 13 bankruptcy, debtors enter into a supervised repayment plan that lasts either three or five years. Filing for bankruptcy will cause an individual's credit score to drop, which can be a problem for both renters and mortgage applicants. The primary problem for renters is that many landlords and property management companies perform a credit check before approving a rental application. A low credit score, or the mention of a bankruptcy on the credit report, can cause a rejection of the application. Fortunately, some landlords and property managers are willing to work with people in bankruptcy, particularly if the applicant is employed, has letters of reference from previous landlords, or is willing to pay an additional security deposit.

Fed report reveals growing revolving debt delinquencies

South Carolina residents may be aware that household debt in the United States has been growing steadily. Banks tightened their underwriting standards in the wake of the 2008 financial crisis, but they have become more willing to extend credit in recent years as the economy has thrived. However, data from the Federal Reserve Bank of New York indicates that this willingness to lend has resulted in a large number of Americans falling behind on their credit card payments.

Revolving debt delinquency rates increased to 2.47 percent in the second quarter according to the Federal Reserve report. Capital One, Chase and Discover have all reported an increase in the number of credit card accounts falling into arrears. This marks the second consecutive quarter that delinquencies have risen, and experts are especially concerned about a worrying increase in the number of accounts that are seriously delinquent. Credit card delinquencies stood at 2.2 percent in the second quarter of 2016.

Attorney general settlements lead to changes to credit reporting

South Carolina consumers might be interested in some new rules that apply to credit reporting. The Consumer Financial Protection Bureau reports that approximately 43 million people in the U.S., nearly one in five with credit reports, have medical collections actions listed thereon. Less than 8 percent of those listed collections have been marked paid, and it is unknown how many of them might have been paid by insurers and should therefore be removed.

As part of two settlements between state attorneys general and credit bureaus Experian, TransUnion and Equifax, medical collections will be deleted from reports after they've been paid by insurance. It is unknown how many credit reports will be impacted, but it is thought that most credit reports will remain unchanged. Additionally, the credit reporting agencies will enforce a waiting period of 180 days before unpaid medical debts appear on credit reports.

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