Debtors in Texas who have filed for bankruptcy may have legal recourse if their creditors continue to pursue collections. Bankruptcy filers are given an automatic stay, during which creditors are prohibited from contacting the debtors to collect on the debts.
Texas residents who are contemplating bankruptcy are often concerned about obtaining future credit. This is a valid concern, especially in the area of automobile loans since transportation is often necessary to retain employment.
The average Texas resident has a credit score of 656, which is considered fair but not good, and has $6,902 in revolving debt according to figures from Experian. The consumer credit reporting agency's annual State of Credit report reveals a growing North-South divide. Minnesota residents top the list with an average score of 709 while Mississippi residents have the nation's lowest average credit scores. Experts are not surprised by the data as credit scores have been following this trend for about two decades.
Timing could make a big difference in the outcome of a bankruptcy. The longer a Texas individual or couple waits to file bankruptcy after they know they are in financial trouble, the harder it could be to recover. According to data from the Consumer Bankruptcy Project, two-thirds of the people who eventually file for debt relief struggle for more than two years with bills they are not able to pay.
During the first quarter of 2018, Americans paid off $40.3 billion in credit card debt. However, many Texans are still in the red. A report by WalletHub, which used data from the credit agency TransUnion, the Federal Reserve and the U.S. Census Bureau, found that although the second largest amount was paid off since the beginning of 2009, credit card debt remains at the second highest point since the end of 2008.
Debtors in Texas and throughout the nation could use bankruptcy as a way to obtain financial relief. However, it should generally be used as a final option when there are no other ways to repay balances owed to creditors. It is important to note that bankruptcy does not eliminate every type of debt that a person could have. For instance, it generally won't take care of taxes owed or back child support payments.
Texas residents who are unsure about how they will pay down their debt balances may start thinking about filing for bankruptcy. In fiscal year 2018, there will an estimated 733,000 companies and individuals doing so, which is up from 685,000 in 2017. According to the Federal Reserve, Americans had a total of more than $1 trillion in credit card debt at the close of 2017. They also carried a $1.2 trillion in auto loan debt and $1.4 trillion in student loan debt.
Although bankruptcy filings are down across the country, Texas consumers may find themselves overwhelmed by debt because of a job loss, medical issues or mounting credit card bills. They might be worried about how filing for bankruptcy will affect their credit. However, it is possible to start rebuilding credit, and some people may see their credit score improve as soon as they file.
Many Texans struggle under the weight of their student debt. Unfortunately, however, these obligations are very difficult to discharge in bankruptcy. A large part of the reason is because Congress has passed several laws beginning in the 1970s forbidding the discharge of these types of loans in most cases.
Houston residents earning the metro area's average wage would have to work for 20 months to pay off the city's median credit card debt, and it would cost them $799 in interest to do it, according to recent a report from CreditCards.com. The consumer financial advice website used the 13 percent interest rate to perform the calculations from the Federal Reserve's most recent consumer credit report. This grim statistic makes Houston's average debt burden the third highest in the country, and the figures suggest that families in many parts of the Lone Star State are struggling to cope with their credit card bills.