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Budgeting is one of the first important steps for debt management

There are many different kinds of debt that people can hold, but the high interest rates that credit cards can bring can be among the most difficult to manage. Those who owe money to Connecticut banks and credit card companies would benefit from taking a serious look at their finances and budgets. The best debt management solutions depend largely on on the debt load, type and repayment abilities.

The first step Connecticut residents should take in debt management is to sit down and write out a budget. Those who have a budget but are still accumulating credit card debt may benefit from revising their current spending plan. It is a good idea to find as many places to cut expenses as possible so the maximum amount can be contributed to debt repayment.

Is loan consolidation a good debt management practice?

Those dealing with financial issues can often be confused by conflicting advice from ads, banks, financial advisors and even loved ones. One of the most common debt management practices Connecticut residents use to deal with credit cards and other unsecured balances is debt consolidation. While this might seem like an easy win on the surface, it is important to carefully consider the pros and cons of any debt management tactic.

Debt consolidation is the practice of taking out a large, lower-interest loan and using that money to pay off higher-interest accounts. For example, someone with debt on two credit cards with 20% interest rates can take out a 6% loan and use that to pay down the credit cards. Then, they would pay off the lower interest loan over time, thereby owing less interest.

Is personal bankruptcy the best option for mounting debt?

Many people in Connecticut face debt of one sort of another, but when does crushing debt get so serious that personal bankruptcy is a viable option? Many individuals and families do not know the answer to this question, but there are many professionals who can help advise them on this issue. Here are a few pieces of information people should consider when facing the possibility of personal bankruptcy.

The first thing to understand is how to file for personal bankruptcy. Typically, individuals will file for either Chapter 7 or Chapter 13. Filing fees amount to a few hundred dollars and attorney fees are also part of this undertaking, but most people will simply redirect debt repayment funds to pay these bankruptcy filing fees.

Medical debt the leading cause of personal bankruptcy

There are many personal and financial situations which can lead a family or individual to consider bankruptcy. For one Connecticut family, the high cost of giving birth in a hospital has made personal bankruptcy an option. Health care costs and outstanding bills can be a serious financial issue for underinsured individuals.

Although the Connecticut woman had health insurance that covered some pregnancy costs, additional expenses for doctor's trips and the birth itself added up throughout the process. The 2016 birth was a positive experience and the baby was born healthy. However, following the birth, the family was left with a large bill for uncovered expenses. Currently, the family is facing nearly $150,000 in medical debt.

Claire's works toward debt management after bankruptcy filing

When a business is forced to close its doors, defining how to handle the debt it holds is one of the main challenges. While bankruptcy filings provide some debt management standards, agreements with creditors are still important to reach. Claire's Stores, which have several locations in Connecticut, have recently filed for bankruptcy and reached an agreement with creditors to restructure debt of around $1.9 billion.

While the company's CFO remained hopeful about Claires' business model, the decline in mall traffic and growing debt caused the eventual bankruptcy filing. Specifically, the CFO shared in a court affidavit that mall traffic fell 8 percent year-over-year. The company's debt resulted in $183 million per year in interest payments alone, requiring serious action and restructuring.

When should someone consider personal bankruptcy?

For people dealing with mountains of debt, bankruptcy can seem like a reasonable option. However, it is important that Connecticut individuals considering personal bankruptcy understand the legal, financial and personal implications of taking this step. There are many misconceptions about bankruptcy, so education is critical for anyone considering this step.

One of the more confusing issues around personal bankruptcy is exactly when it is the best option. Some people believe that a high amount of debt is good reason to consider bankruptcy, but really there are other circumstances that also may contribute to this decision. Bankruptcy is not about volume of debt so much as it is about the ability to work out of those debts. Many people have the means to handle the debt without taking this step, so they can consider alternatives.

How do retailers liquidate assets under Chapter 7 bankruptcy?

As retailers such as Toys R Us close their doors around the United States, many people have questions about how the closing sales will function. Much of how these sales will play out in Connecticut and throughout the country is determined by bankruptcy liquidation, also known as Chapter 7 bankruptcy. This may be the fate of Toys R Us as the retailer filed for Chapter 11 bankruptcy protection in September in hopes of restructuring their operations and cutting debt.

If and when Toys R Us converts its Chapter 11 to Chapter 7 bankruptcy, it will be able to sell off all assets and close the remaining stores. In this type of bankruptcy, a trustee is appointed to liquidate the company's assets. This is the process which triggers closing sales, with the money raised from these sales being used to pay off people in a predetermined order.

Understanding debt management for student loans

As millions of people in the United States struggle with student debt, many questions may arise. One of the common ones for those seeking debt management is the consequences of not paying their student loans. Low interest rates on this kind of debt can make repayment easy to put off for some people, though the amount and terms on a student loan can influence the impact of unpaid loans on Connecticut residents.

Consumer debt, such as credit cards, often carry higher interest rates than student loans. Some people in Connecticut opt to pay these and neglect their debt from school, which can cause them to default on the student loans. Understanding how to avoid or manage a loan default is important for anyone dealing with debt management.

Personal bankruptcy does not prevent improved credit scores

Residents of Connecticut who have a discharged and successfully completed bankruptcy often ask how long it will take to restore their credit to a respectable level. Until that is done, it is more difficult for them to obtain credit and they will tend to be hit with higher interest rates. After a personal bankruptcy is completed, however, it will not take more than a few years or even less in some cases to get the credit score up into the 700 range.

A Chapter 13 bankruptcy may stay on one's credit reports for up to seven years whereas a Chapter 7 may continue to be reported for up to 10 years. However, with focus and a concerted effort to improve the report, substantial improvement can be obtained quickly after the bankruptcy is completed. If a strong program of action is followed, in many instances the actual references to a bankruptcy will fall off the report much sooner than the maximum allowable years.

A history of credit cards, and maybe the need for debt relief

For those in Connecticut who've been wondering about the history of consumer credit, a recently published article could shed a great deal of light on that topic. It may be hard to believe in the age of easy-access credit, but there was a time in American history when credit was extended from one party directly to the other, requiring a face-to-face transaction. In today's world, credit cards are seemingly everywhere, and consumers can expect to never lay eyes on the people who process those accounts and bills. Learning more about the history of credit can also illuminate the need for debt relief

According to the research behind this piece, industrialization brought about disposable income. That allowed consumers to handle installment plans, allowing them to purchase items on credit and pay their debt over time. The credit card itself was not introduced until 1958, when a bank manager came up with the idea. 

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