Christopher Todd Morrison, P.C.
Affordable Bankruptcy

Houston Bankruptcy Blog

Lower income and single motherhood worsen credit card debt

Incomes naturally vary among individuals in Texas, but on the whole, gender influences income and levels of credit card debt. The Federal Reserve System has calculated that women have a median salary of $41,554 compared to men at $51,640. Lower income translates into higher credit card debts. A recent study found that 26 percent of female credit card holders doubted that they would pay their full balances this month. When asked the same question, only 14 percent of men doubted that they would pay everything on their credit accounts.

Single parenthood exacerbates financial problems for many women. An analyst at CompareCards said that single mothers faced the greatest challenges. They had a greater likelihood of turning to credit cards every month to make ends meet.

Using credit cards responsibly

Many people in Texas who struggle with debt decide to cut up their credit cards so that they can avoid buying items they cannot truly afford. While credit cards can get many people into debt, they also can play an important role in a plan to responsibly rebuild a good credit history.

Debtors can use rewards points on some cards for things like airline miles or cash back to offset expenses. Paying off cards every month is key for debtors who want to avoid unnecessary interest costs.

Getting a credit card debt settlement

Many Texas residents struggle to pay their monthly credit card bills. As part of the agreement to obtain credit, cardholders sign documents agreeing to pay all the debts that they owe to the credit card company plus interest. When these debts aren't paid on time, many credit card companies realize that referring the matter to attorneys or collection agencies simply isn't worth it.

Some debtors who can't afford their bills choose to negotiate a settlement with the credit card company. A settlement lump sum payment is typically for around 50 to 80 percent of the total amount owed. It is a good idea for anyone who chooses to take care of their bill this way to get the offer in writing before sending a payment.

The difference between unsecured and secured debt

Texas residents who are looking to borrow money will take loans that are labeled as secured or unsecured. A secured loan is one that is backed by an asset such as a home or a car. If a borrower fails to make a payment on a secured loan, the lender has the right to take back the asset linked to the loan. For instance, if a person fails to make payments on a car loan, the lender can repossess the car.

As there is less risk for the lender, borrowers generally receive lower interest rates on secured loans. However, it may be necessary to insure the asset or meet other conditions to receive the funds. With an unsecured debt, the lender receives only a promise that it will see its money back. Credit cards are a common form of unsecured debt, and these types of loans tend to have higher interest rates.

Millennials carry large debt load in San Antonio

Of all American cities, San Antonio is where millennials have the highest median debt. Those between the ages of 22 and 37 who live in San Antonio have a median balance of $27,122, according to LendingTree. While student loan balances make up the majority of that debt nationally, auto loans are the largest source of debt in San Antonio. On average, car loans make up 43 percent of what is owed to creditors.

One of the reasons why San Antonio tops the list is because local wages are lower than in other cities. Someone who is living in San Francisco may have found their first job out of school or are otherwise established in their careers. This gives them the opportunity to pay down debt even if the cost of living can be higher there. Austin is third on the list with a median debt of $26,164 for those born between 1981 and 1996.

What individuals and companies should know about bankruptcy

When a person or business in Texas cannot pay debt, bankruptcy may be an option. This process allows for some or all debts to be discharged either through liquidation or through a repayment plan. Those who file for Chapter 7 bankruptcy will use the money obtained after selling non-exempt assets to pay off creditors. Debtors will likely need to take a means test to determine if they can afford to pay off some of their debts.

If the answer to that question is yes, that debtor will usually be required to file for Chapter 13 bankruptcy. Chapter 13 bankruptcy involves a payment plan that last for three or five years. Depending on how much debt a person has, he or she could be eligible for Chapter 11 bankruptcy. However, this is usually reserved for corporate entities that want to reorganize their debts.

3 reasons millennials declare bankruptcy

If you are a millennial, you may have concerns about your finances. According to the Wall Street Journal, two-thirds of millennials have at least one type of outstanding long-term debt. Having debt is not the only issue. Millennials are struggling to make payments and worry about accumulating too much debt.

Do not feel bad if you are a young person who is struggling with finances. Filing for bankruptcy may be an option that gives you a necessary fresh start. Here are some reasons why millennials choose to declare bankruptcy.

Medical debts can create headaches for patients

In a recent study, more than 2 percent of credit reports had a medical debt of less than $200 sent to a collection agency. The study, which was published in the journal Health Affairs, looked at 4 million credit reports from 2016 to come to that conclusion. While these medical debts may seem small, they can turn into major issues for Texas residents who have them sent to collection.

Typically, a hospital or other service provider will wait about six months to a year before turning a debt over to a collection agency. This can both lead to a lower credit score in addition to constant calls from the debt collector. Generally speaking, younger people tend to have more trouble paying a medical debt compared to those in their 60s. Researchers think this is the case because younger people are more likely to be uninsured. They may also make less than older individuals and have less savings.

Senate tries again with medical debt reform

If the Medical Debt Relief Act were to pass, it would require 180 days to pass before medical debt could be reported on a credit report. It would also remove medical debts that had been settled or otherwise paid off. This could work to improve the credit scores of many people who live in Texas and throughout the country. The legislation was recently introduced again by Senator Jeff Merkley of Oregon.

In the meantime, the major credit bureaus are mostly abiding by the terms of the National Consumer Assistance Plan. It says that accounts that were paid by an insurance provider should be deleted by debt buyers. Furthermore, debt buyers and collectors are not supposed to report any debt that is not at least 180 days past the original delinquency. The main reason why there is a push to change the rules for how medical debt is treated is because it isn't a good predictor of a person's ability to manage other debts.