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Law Office of W. Thomas Bible, Jr.

Chattanooga Bankruptcy Law Blog

Parents burdened by debt can teach valuable lessons to children

As children in Tennessee return to school, they will learn many lessons. These lessons do not always take place in the classroom, but also on the playground and at home. Parents often wish to take advantage of their children's receptivity to learning by instructing them in important life issues, like managing money. Some parents do this because they have had their own struggles with finances, and they want to spare their children the anxiety of living burdened by debt.

Some parents teach children how to use money wisely by offering allowances for household responsibilities like making their bed or helping at supper. Having money can be a powerful thing for a child and a tremendous tool for you to demonstrate the importance of saving, planning and sharing. As children grow, they may desire more expensive things. Concert tickets, the latest fashions and the newest technology may entice a child to borrow money from you. You may use this opportunity to teach valuable lessons about debt.

Tennessee is among the states with most Chapter 7 filings

Even with bankruptcy rates declining, there are many areas of the country where people struggle with debt. According to a recent report, states in the south had higher rates of bankruptcy than other parts of the country. Tennessee reported the most overall bankruptcies. For people seeking to get out from under the burden of debt, Chapter 7 seems to be the type of bankruptcy that provides the most relief.

If more than half of a person's income is used to pay on unsecured debts, that person may be feeling desperate about his or her financial situation. Additionally, a person who cannot figure a way to pay off the debt within five years, or who is kept awake at night worrying about debt, may be a candidate for bankruptcy.  A Chapter 7 bankruptcy may remove most unsecured debt, such as credit cards, some personal loans, medical bills and utility bills.

Medical debt often goes hand in hand with credit card debt

Despite efforts by various presidential administrations to help Americans obtain quality, affordable health care, millions of people in Tennessee and across the country are underinsured or uninsured. Additionally, 64 million Americans are burdened with medical debt. In fact, medical debt is the primary reason for bankruptcy in the United States.

While overall medical debt has declined by about 18 percent in recent years, it does not take much time for medical expenses to get out of control. Even when people have insurance, they may often face out-of-pocket expenses that add up quickly. For example, since many insurance plans do not cover dental visits, some people put those payments on their credit cards. One survey showed that more than half of people who make trips to the emergency room end up charging that cost also.

Keeping credit card debt under control

Credit cards are a convenient method of making purchases, especially when one is short on cash. However, it is estimated that the average family in Tennessee and across the country carries almost $16,000 in credit card debt. That adds up to a total of $733 billion nationwide. Because credit card debt can be so costly with its high interest and fees, many people take painful steps to eliminate it, only to turn around and build it back up.

Spending with credit can become a habit that may lead to overwhelming debt. Financial advisors recommend making new habits to prevent debt from taking over one's life. Cutting up the credit cards may be the drastic step a person needs to take to make sure those bills do not begin to mount again. By using a bank debit card, a consumer spends only money he or she actually has available.

To get debt under control, homeowners may consider Chapter 13

Falling behind on mortgage payments is not uncommon. In some cases, people are able to catch up or negotiate with the lender for some extra time. However, if hardships cause a person in Tennessee to fall too far behind, or if the lender demands the full amount of missed payments to avoid foreclosure, this does not always mean the person will lose his or her home. There are other alternatives to get debt under control.

Loans on items like houses and cars are called secured debts because the item itself is the security that a person will repay the loan granted. If a person fails to pay back the loan for the house or car, that item may be claimed by the lender in place of the money owed. When a person is unable to make mortgage payments for an extended period of time and the lender threatens foreclosure, the homeowner may consider filing bankruptcy to keep from losing the home.

Options for managing medical debt in Tennessee

After dealing with a major injury or illness, the last thing someone in Tennessee wants to face is the hassle of medical bills. The cost for hospital stays, diagnostic tests, therapy and lab fees can add up quickly and leave a person facing a mountain of medical debt. Getting a handle on it from the beginning may prevent the situation from getting out of hand.

Advisers warn people not to pay their medical bills with credit cards. Doing so takes away a patient's ability to negotiate a lower price or keep pressure on the insurance company to pay. Similarly, mortgaging one's home to pay outstanding medical bills may make an already stressful situation even worse by putting one's home at risk for foreclosure.

People seek debt relief when collection calls overwhelm

For some who are burdened with debt, constant calls from debt collectors may seem  like a way of life. These calls may cause people to stop answering their phones altogether, assuming that the ringing of the phone can never be good news. People in Tennessee who feel overwhelmed may begin to look at options for debt relief.

The Fair Debt Collection Practices Act protects consumers from harassing debt collectors. The law prohibits collectors from calling people before 8 a.m. and after 9 p.m., and they may not call people at work if an employer forbids it. A debt collector is breaking the law if he or she uses threatening or offensive language, or if he or she continues to call after a person has asked in writing for the calls to stop.

Student loans and Chapter 7 bankruptcy

Of all the debts that a young person can face in America today, student loan debt is by far the most prevalent. Tennessee students already likely know that it is almost impossible for such a debt to be discharged, even in the case of a Chapter 7 bankruptcy filing. However, "almost" impossible does leave room for certain special considerations to be made. 

Federal Student Aid, which is an office of the U.S. Department of Education, says that student loans can be discharged in extremely specific situations. Generally speaking, a bankruptcy court must be convinced that repayment of the student loan would be the cause of "undue hardship" upon the debtor and his or her family. This decision is made in what is called an adversary proceeding in bankruptcy court. 

Credit card debt can be dealt with in several ways

Having too much debt can place one in an uncertain and sometimes hopeless position. When faced with overwhelming debt as a result of credit card overuse, a common response is to cut up the card entirely. However, Tennessee residents may be surprised to learn this is not always the best response to credit card debt. While some individuals face debt they cannot handle, many others may be able to mitigate their debt problems in other ways. 

For example, rather than cutting up a card, it can be helpful to instead limit the use of the card to one or two minor purchases each month. These purchases can be easily paid off, which helps to preserve a positive credit score. While this option may not work for chronic over-spenders, it can be a useful habit to adopt for others. 

Handling credit card debt

For many Americans, debt is a rising problem in 2016. With the national credit card debt expected to top $1 trillion, Tennessee residents may be thinking about how to reduce their debt load. Thankfully there are a variety of strategies suitable for any debt load, from the mildly persistent to the significantly problematic. 

Curbing spending may sound like an obvious way to help bring down debt, but many people do not pay as much attention to their spending as they might. Small purchases like a morning coffee or a fast food lunch may not seem like much, but they can add up in the long term. Considering how to cut back or eliminate these expenditures can go a long way toward saving money and bringing down debt.

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