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Louisiana Legal Blog

How money mistakes really impact credit reports

Louisiana residents may think that their credit scores are only negatively impacted by late payments, exceeding credit limits or other related mistakes. However, even seemingly innocent actions like applying for a new credit card or loan can put a negative mark on a credit report.

A hard inquiry is what credit reporting agencies call a check on credit history by any lender or bank. It happens when someone applies for a credit card or a loan. Even someone with a high credit score and no late payments could see their number drop every time they apply for a new card or loan. Though getting more credit can actually help a credit score, hard inquiries inevitably knock a few points off, and they could stick around on the report for two years.

Important considerations before filing for personal bankruptcy

Not as many people are filing for personal bankruptcy protection these days. Still, some individuals in Louisiana may reach a point where debt is overwhelming enough to entertain thoughts of taking this step. There are times when this type of legal debt relief can be considered a smart move. However, debtors should keep certain factors in mind before exploring the possibilities with this legal lifeline.

A common oversight with bankruptcy is not declaring all debts. In order to eliminate or erase debt, the bankruptcy court needs to know all of the details related to what type of debt is owed and to whom it is owed. The assortment of paperwork required for filing is another potential source of preventable errors, such as not submitting bankruptcy schedules with listed debts and assets. It's equally critical for filers to meet bankruptcy criteria, such as mandatory debt counseling.

Strategies to delay or prevent home foreclosure

When financial hardships strike Louisiana residents, house payments often suffer. Missing mortgage payments will prompt a lender to initiate the foreclosure process after 90 days of delinquency. People in this situation might resolve the problem by working with their lenders or pursuing bankruptcy protection.

Mortgage lenders have a strong interest in avoiding the costly and time-consuming processing of foreclosing on a property. Many lenders will even offer a refinancing deal that could lower monthly payments. Similarly, a loan modification might allow someone to resume and keep up with payments. A repayment plan that provides someone a chance to catch up on payments presents another option. For those who do not expect to ever catch up payments, a short sale might prevent foreclosure. If the lender agrees to settle the loan by selling it for a reduced amount, then the borrower could resolve the debt and avoid a record of foreclosure.

When is it time to accept debt and file for bankruptcy?

Deciding to accept that you need to bankruptcy can be intimidating. Americans place a heavy stigma on bankruptcy, but that does not mean it is uncommon. While bankruptcy can be scary, it is a way that many individuals receive a fresh start.

Bankruptcy is not the end of the world and you are not alone. In 2016, Louisiana had one of the highest rates of bankruptcy, and in 2017 there were close to 800,000 total bankruptcies. While bankruptcy may be more common than you realize, how do you know if you are in a position where filing is your best option?

Finding A Balance Between Income And Debt

Many young adults who live in the Baton Rouge area and other cities across the United States area are already in debt with a large percentage not being of the legal age to drink. This age group is known as Generation Z or those who are between the ages of 16 and 20. The average debt of these young adults is about $4,300. Young adults who are between 21 and 25 are in debt by about $11,000 each with the amount being higher if they don't have as much financial aid as others while attending college or if they attend a university that is a bit more expensive than others.

In regards to a savings account, it's usually not something that young adults have established yet. Those who are considered Generation Z are attempting to turn the financial world around and are attending college in order to have a career to make money. However, there is a large percentage of these young adults who don't really understand the ramifications that can come with financial independence and sometimes don't make good choices.

Rising consumer debt worries financial experts

The amount of money owed by households in Louisiana and around the country to banks and credit card companies fell sharply in the wake of the 2008 financial crisis and remained fairly stable during the ensuing recession, but figures from the U.S. Federal Reserve reveal that it has now surpassed its pre-crisis levels. Household debt in the United States climbed to an all-time high of $13.2 trillion by the end of March 2018 according to the nation's central bank, and most financial experts expect this figure to rise even higher in the months and years ahead.

Some experts say that rising consumer debt is a reflection of a robust economy and low unemployment, but others are concerned about the precarious financial situations that research suggests many Americans find themselves in despite several years of economic prosperity. A study released by the Federal Reserve in 2017 revealed that more than one in three American adults would have difficulty paying an unexpected $400 bill in an emergency.

Many more seniors filing for bankruptcy

While many older people are planning for retirement, others in Louisiana and around the country are considering bankruptcy. Financial hardship has impacted many older Americans, and the number of older people declaring bankruptcy has increased markedly since 1991. This growth in bankruptcy far outweighs the overall aging of the American population, according to a study from the Consumer Bankruptcy Project. Indeed, the report found that around 800,000 petitions for personal bankruptcy are filed each year, and around 100,000 of them are filed by senior citizens.

Many of the cuts to social programs that have taken place in the last decades have been particularly devastating to seniors. The retirement age has been raised for people to access Social Security and seniors have had to pay more of their medical bills out-of-pocket. In addition, traditional employer pension plans have been on the decline, while programs like 401(k)s, which shift the responsibility of retirement savings to workers, have been rising. This comes in addition to an often-crushing burden of credit card debt and other bills well into the retirement years.

The high cost of credit card minimum payments

Households around the country with revolving debt balances owe an average of $6,081 to credit card companies. Paying this debt off can be difficult for Louisiana consumers who are struggling to meet their financial obligations, and many credit card holders are only able to make their minimum monthly payments. Credit card minimum payments are usually $20 or $25 when revolving balances are low, but they climb to 2 to 3 percent of the outstanding amount when debt levels rise.

Credit card balances can take decades to pay off when borrowers make only minimum monthly payments as revolving debt interest rates are generally far higher than the rates offered on mortgages or installment loans. The financial information website NerdWallet calculated how long it would take to pay off $6,081 at 14.99 percent interest, and it found that it would take 14 years and cost more than $4,000 in interest if only minimum payments are made.

Stopping harassment by debt collectors

Debtors in Louisiana who suffer from harassment by debt collectors have legal recourse. While these companies are within their legal rights to contact consumers about delinquent accounts, any harassment that they conduct is illegal. Those that engage in harassment can be reported to the Federal Trade Commission and can be subject to punitive action.

The Fair Debt Collection Practices Act is legislation that protects consumers from harassment from debt collectors. According the FDCPA, debt collectors that are used by third party agencies are prohibited from any behavior that can be deemed as harassing. While the provisions of the FDCPA do not pertain to collectors that are employed by the original creditors, some states have their own laws that address this loophole.

Preparing for your meeting with the bankruptcy trustee

One of the more important individuals in your bankruptcy case will be the trustee. After the United States Trustee Program appoints one, the trustee has several duties to perform for your estate whether you file a Chapter 7 or Chapter 13 bankruptcy. Some of these tasks include reviewing and rounding up all of your property, selling your estate and distributing any payments made to creditors.

The trustee is also in charge of detecting any inconsistencies or fraud in the papers and can make any objections to the bankruptcy plan. If they find anything wrong with your case at the meeting of creditors, they can object to the discharge and put you under criminal investigation. It is crucial that you prepare your case properly to avoid any legal and financial trouble.