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Stratford Bankruptcy Blog

Why would someone with a good credit score file for bankruptcy?

A person's credit score affects his or her ability to get a loan, obtain good interest rates and more. Not only do lenders view borrowers with good scores more favorably, they are also more likely to give those consumers access to more diverse credit offers. A record number of Americans now have good or excellent credit scores, so it might feel counterintuitive to think of this group being at risk for bankruptcy. That risk is unfortunately very real.

A good credit score is considered to be 700 or more, while an excellent score starts at 800. Nearly 60% of Americans have credit scores that fall into one of these ranges, a fairly significant improvement from just a decade ago. Since 2010, borrowers in Connecticut and across the country have been making increasingly fewer late payments. Delinquency rates also fell over that same period of time. Delinquencies and late payments negatively affect credit scores, so it is easy to see why scores have gone up.

Student loans are disrupting adult's lives -- bankruptcy can help

Living with debt is a daily struggle, especially for those who feel as if the cycle of debt will never end. It does not take long to end up in a situation where debt is the most defining aspect of a person's life. In fact, young adults in Connecticut are frequently starting their careers already saddled with more debt than they can realistically handle, although bankruptcy may help.

Student loan balances have skyrocketed over the past 30 years. Early in the 1990s, a college graduate might expect to leave school with around $10,000 of student loans. Many of today's college graduates start off their adult lives owing $30,000. These adults are not making nearly enough to pay off those loans, either. College grads can expect about $50,000 for their post-school starting salaries, less than 1% more than in 2017.

Overspending is nudging consumers toward bankruptcy

A budget is an important tool for managing personal finances. Many people in Connecticut already use budgets to track their bills, daily expenses and spending habits. This is an excellent habit that even more people should take advantage of, but it is not necessarily enough to conquer debt and avoid bankruptcy.

Research from Slickdeals shows that 74% of consumers have some kind of budget. Although it is great that so many adults are trying to budget their income and expenses, it may not be all that useful. According to the same research, 79% of people with a budget never seem to be able to stick with it.

Could you discharge student loans in bankruptcy soon?

Having a college degree is usually necessary for securing a good, well-paying job. But since most people in Connecticut have to take on student loans to get their degrees, getting that well-paying job might not even do much to advance a person's financial situation. Discharging student loans in bankruptcy is also virtually impossible, although getting rid of other debt can reduce some of the burden when it comes to repayment. However, a recently proposed bill could change all of this.

The Student Borrower's Bankruptcy Relieve Act of 2019 highlights a serious problem with the current bankruptcy system. Unless a person can prove that paying back student loans will create an undue hardship, he or she cannot discharge those loans during bankruptcy. The bill proposes changing the bankruptcy code to make both federal and private student loans dischargeable.

Bankruptcy: Will making financial New Year's resolutions help?

With New Year's Day and the end of 2019 less than a month away, some people are already thinking ahead to their 2020 resolutions. Weight loss and other forms of personal improvement are some of the most well-known resolutions, but they are far from the only popular ones. Rather than file for bankruptcy in the next year, a significant number of adults would rather improve their financial situations. Paying off debt is certainly a great goal, but many resolutions are more than the average person in Connecticut can realistically handle.

Fidelity Investments conducted the online 2020 New Year Financial Resolutions, surveying just over 3,000 adults over the age of 18. When asked to choose between shedding 5 pounds or saving $5,000, 84% responded that they would much rather build up their savings. Another 84% also said that paying off at least some of their debts was more important to reducing screen time for things like phones and computers.

The role of debt consolidation in bankruptcy

Paying off all debts in the smallest amount of time might be the ideal situation, but it is not realistic for the vast majority of people. Instead, a person is more likely to make the minimum payments or even miss payments if he or she has too much debt. People who are in this type of situation may try to avoid bankruptcy by consolidating debt with personal loans, but it may not be as effective as some hope.

Americans now have more than $300 billion in personal loans, which is an 11% increase from 2018. Aside from debt consolidation, Connecticut residents choose to take out personal loans for all kinds of reasons, including home improvement, large purchases and major projects. Personal loans are frequently treated as a better alternative to credit cards, and this can sometimes be true. When a borrower has excellent credit, he or she could get a low interest rate, such as 5%. A borrower with a poor credit rating would be more likely to end up with an interest rate of 30% or even higher.

How financial confidence can lead to bankruptcy

Things are not looking too bad for Americans right now. The economy is performing relatively well, unemployment rates are low and there fewer delinquent credit cards than in 2009. Despite this, many Connecticut consumers might not realize just how close they are to needing bankruptcy.

With only a 3.6% unemployment rate and recent 1.9% growth in the economy, a lot of people feel pretty confident when taking on more debt. This is especially true when it comes to credit cards. However, just because people are more comfortable using their credit cards to make purchases does not mean they feel confident when it comes to paying them off.

Owe tens of thousands in extra debt? Bankruptcy is an option

Borrowing money may not always be ideal, but it is unavoidable for most people. Mortgages, auto loans and student loans can quickly pile on top of one another, putting consumers in a position where bankruptcy might be the best option. However, people in Connecticut are borrowing money for a lot of other reasons, too.

A little more than 25% of people in America have debt that is not a student or auto loan, business loan or mortgage. The average amount of that additional debt comes to $19,833. Of those with this extra type of debt, nearly 40% took out loans to pay for medical treatments, such as dental work and fertility treatments. Another 31% borrowed money to pay for either in-home care or nursing homes for elderly family members.

Negative equity can cause a financial crisis; bankrupcy can help

Buying a vehicle is a significant investment, but most people do not have any other options. Having a car is necessary for things like driving to work, going to the grocery store and even picking kids up from school. Cars do not last forever, though, and some Connecticut consumers might have to buy a new vehicle before they are ready. This can put people into precarious financial situations that may need to be addressed through bankruptcy.

High mileage, increased upkeep costs and changing needs are all common reasons for trading in old vehicles for newer ones. Unfortunately, car owners cannot control when these issues will arise. Since car prices are rising, it is getting harder and harder to pay off an auto loan before trading purchasing a new vehicle.

Paying off student debt might be easier with bankruptcy

Getting an education is very important for young adults in Connecticut, but unfortunately that education usually comes with a very large price tag. However, while many college grads leave school with a significant chunk of debt, some have much more than others. Since student loans usually cannot be discharged through bankruptcy, some people might not consider just how helpful bankruptcy can be.

While almost all jobs are important regardless of pay or purpose, there are some positions that benefit society and must be filled. These include jobs in both the social assistance and private health care industries. Even though these are very helpful and needed industries, adults who work in them have the largest average monthly student loan payments. On average, these college grads pay $685 per month. Those who work in education have the second highest average at $563.

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