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Is social media getting in the way of debt management?

Debt is nothing new, but the levels of debt that many Americans now have are much higher than in the past. Credit card debt reached a record high of $834 billion in 2018, and student loan delinquency rates are not looking good either. The reasons behind these growing debts can vary from person to person, and those reasons will also affect how any given person will approach debt management. Figuring out where some of their debt comes from can help Connecticut consumers in this decision.

The psychologist Elizabeth Lombardo believes that some of the increase in debt could be blamed on shifting societal values. She thinks that society is focused on instant gratification much more than in the past, which could be driving up debt for people who might be better off waiting to make certain purchases. But is this the fault of out-of-control consumers with no self-control? Probably not.

Could debt management increase your foreclosure risk?

Methods for dealing with debt are a popular topic of discussion on the internet. While some of these methods might be appropriate for a select group of people, they could be putting many others at risk for falling even deeper into debt than before. Home equity borrowing is especially troublesome as it can increase the risk of foreclosure for Connecticut homeowners.

As debt levels continue to grow, some people are struggling to repay their various debts. Household debt -- including credit cards, student loans and mortgages -- hit $13.54 trillion in 2018, an all-time high. Credit card balances are as high as they once were in 2008 and accounts over 90 days past due are growing. When faced with so much debt, personal loans can be a good method for consolidating debt, making it easier for consumers to make a single monthly payment. Unfortunately, it can also provide a false sense of zeroing out debt, leading some to increase their spending habits.

New consumer protection rules could help with debt management

People in Connecticut with past-due bills are likely already familiar with creditors and their sometimes harassing collection attempts. While there are rules in place that are meant to protect consumers from abusive debt collection practices, the protections are not as thorough as they could be. Newly updated rules could soon make life easier for those struggling with debt management while also fielding harassing attempts at debt collection.

Kathy Kraninger, the director at the Consumer Financial Protection Bureau, recently announced that the agency would be updating consumer protection rules. One of the proposed updates includes setting a clear limit regarding how many phone calls a debt collector can make to a single consumer in a week. The changes would also clarify what constitutes abusive practices and acts, which the 2010 Dodd-Frank Act prohibited.

Home foreclosure rates reach 20-year low

Owning a home can come with any number of emotions, from joy about being free of landlords to frustration over dealing with unexpected home repairs. However, one emotion most people in Connecticut probably hope to never face is despair over home foreclosure. Luckily, foreclosures are happening far less frequently than they have in recent years.

The number of mortgages that are at least 30 days past due are at their lowest rate in 20 years. Only 4% of mortgages fall into this category, down nearly a full percent from Jan. 2018. The number of properties landing in foreclosure inventory also dropped down to 0.4%, which is another 20-year low.

Medical debt stands in the way of debt relief

Seeking prompt medical attention for serious illnesses and injuries is important, but many people in Connecticut might be skipping out on essential treatment. Fear of going into debt because of medical bills is a sad reality for many Americans, and for some it is unavoidable. As patients borrow more and more money to pay off medical debts, some may be in need of options for debt relief.

A survey from West Health-Gallup discovered that over a period of 12 months, one in eight Americans borrowed to cover their medical bills, totaling an astounding $88 billion. The survey also found out that 65 million adults completely avoided necessary medical treatment because of the associated costs. About 25% of adults said they had to make cuts to their spending in order to afford care.

Personal bankruptcy -- is it your best option?

For some people, the monthly bills seem to accumulate slowly over time. For others, several unexpected expenses seem to hit all at once. No matter the reason a person finds him or herself so deeply in debt that it seems impossible to get out, bankruptcy can potentially be a viable option. But how can a person in Connecticut figure out whether personal bankruptcy is the right decision? Here are a few things to consider.

Depending on where a person's income falls in relation the state's average, he or she will have to file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 is for those who earn less than the state's average income and can discharge most debts in as little as six months, but filers may have to give up some of their personal property. Those who earn more than the average can file for Chapter 13 and will have to create a repayment plan (for court approval) that lasts anywhere from three to five years, after which any remaining debts will be discharged. People can generally keep most of their personal property when pursuing Chapter 13.

Federal grand jury charges 11 for foreclosure help scams

The prospect of losing a home might feel like too much to bear for some Connecticut homeowners. However, foreclosure is not always a given. Many homeowners find success by negotiating with their lenders to modify their loans, and some can even benefit from methods such as short sales. Unfortunately, there are some individuals that try to take advantage of homeowners who are going through difficult periods in their lives.

In a recent indictment, 11 individuals across five different states were charged by a federal grand jury for allegedly scheming to defraud homeowners. These individuals supposedly promised to negotiate with lenders on behalf of homeowners facing foreclosure. These were apparently phony promises, and the organizations purposely targeted financially insecure homeowners through public court records and various online databases.

Chapter 7 bankruptcy could help people with serious medical debt

Medical bills are one of the most common types of debt carried by Connecticut consumers, and for many, it can be overwhelming. One medical emergency, broken bone or extended illness, and families could find themselves facing a debt burden they can never hope to manage on their own. In some situations, medical debt is a good reason to move forward with a Chapter 7 bankruptcy filing. 

Many Americans find themselves facing medical bills they did not expect. In one case, a women got a large bill after an emergency surgery, even though the hospital accepted her insurance. It turned out that the doctor who performed the surgery did not. As a result of not paying the bill, there is now a lien against her home, and she is being docked a quarter of her paycheck until the debt is paid.

Personal bankruptcy is hard for disabled veterans

Disability benefits play an important role in many people's finances, helping them to stay afloat even when they might be struggling with money and bills. In most cases, filing for personal bankruptcy will not affect a person's ability to continue receiving disability benefits. For Connecticut veterans this is not always the case.

Disability benefits -- including Social Security Disability benefits -- are not taxable, and under current bankruptcy laws this means they are not considered to be disposable income. This means that not only do they not count towards a person's general income, but they also cannot be seized for repaying debt collectors. This exemption does not apply to veterans disability benefits.

Can I use a personal loan for debt management?

Juggling multiple monthly payments for various debts can be more than just stressful -- it can be financially crippling. Personal bankruptcy can be an effective debt management solution for Connecticut consumers who can no longer keep up with their monthly payments, but some people are trying a different route first. Personal loans for debt consolidation are becoming an increasingly popular choice.

In 2018, personal loan debt grew more than debt for credit cards, auto loans and all other types of consumer debts. There are currently more than 36 million outstanding personal loans in the United States, and the average balance sits at $15,143. The average can fluctuate depending on the age group, with baby boomers shouldering the largest balances at about $19,403. Generation Z owes the least in personal loans, and that generation's average balance comes out to $5,941.

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