Law Office of Allan E. Dunaway, PLC

Louisville Bankruptcy Legal Blog

The benefits of getting out from under bad credit

Good credit is becoming more and more important in Kentucky for a variety of reasons. It's certainly essential when borrowing money or financing a purchase. Not only can credit help one qualify for a better rate, but it often determines approval or disapproval. Landlords regularly check credit standing, prospective employers may ask and even utility companies now want to find out a potential customer's bill-paying history. Repairing bad credit makes sense, and the sooner the better.

As financial experts caution, there is no such thing as a quick fix for bad credit. While negative information can appear seemingly instantaneously on a credit report, removal takes time. How long particular negative items remain on a credit report is based on the three credit bureaus' criteria. There are some things that can be done immediately to right the ship and begin the lengthy process of credit restoration.

Talking about the gender debt gap

Women in Kentucky and throughout the country tend to have more debt than men. This is partially because of the gender wage gap that sees a female worker earning as little as 72 cents for every dollar made by a male. For instance, a woman paying student loans has an average debt of $30,716 compared to a man's average of $24,232.

Debt disparities exist when it comes to auto loans and credit card debts as well. Women have an average of $12,183 in auto loans and $6,559 in outstanding credit card balances. Men have an average of $10,371 in auto loans and $5,163 in credit card balances to repay. Regardless of a person's gender, there are ways that individuals can climb their way out of debt. For instance, they can start to look for ways to cut back on expenses such as eating out or canceling a gym membership.

Getting back on track after bankruptcy

Many people are starting to embrace the bankruptcy process and all of its benefits. However, if they do not take the proper steps, they might find themselves down the same road again.

Thankfully, there are assistance options for getting your financial picture back on track after a bankruptcy. Before you start the process, there are a few important steps to understand.

When a credit card works best to cover an expense

Kentucky residents and others who need help paying bills or other expenses may benefit from using a credit card to do so. Generally, it can be a good idea to use a credit card for bills that can be paid off in a year or less. They can also be ideal for those who can pay off the balance quickly and want reward points.

In some situations, credit cards can be useful to pay for repairs that will later be paid for by an insurance company. For instance, if a roof leaks or an HVAC system starts to go, a homeowner could first put the debt on a credit card. This can be ideal when the insurance company may take weeks or months to pay for an item that needs to be repaired immediately. It may be possible to obtain a credit line with 0 percent interest for up to 20 months.

Poor and wealthy hold the highest average credit card balances

People of any socioeconomic level in Kentucky might have credit card debts. This is not necessarily a problem unless people charge more than they can realistically pay back. Low-income people with no net worth rely on credit the most often, but affluent people also carry high balances, according to data analyzed by ValuePenguin.

Among households with zero or negative net worth, people owed an average of $10,307 on their credit cards. People at this income level need credit cards to get by because they have no resources. On the other end of the spectrum, households with net worth above $500,000 had the second highest credit card balances with an average of $8,139. Although people at this level had high balances, they tended to be in the best position to pay them off.

Why waiting to file for bankruptcy can be a mistake

Debtors in Kentucky and throughout the country may be doing themselves a disservice by waiting to file for bankruptcy. By waiting, they could deplete assets or otherwise negate some or all of the financial benefit gained by filing. In many cases, individuals who choose to file only do so when they are at the point when they face debt collection calls or creditor lawsuits. The time that people spend putting off asking for protection from creditors is called the sweatbox.

According to a survey from Notre Dame Law Review, 66 percent of cases analyzed involved those deemed to be long strugglers. This means that a person spent two years or longer in the sweatbox. Furthermore, roughly 33 percent took five years before seeking bankruptcy protection. Those who chose to wait before filing for bankruptcy generally had higher debt-to-income ratios than others with debt.

What to know before filing for bankruptcy

Filing for personal bankruptcy can come with many benefits for Kentucky consumers who are looking to get a handle on their debt. However, it is important to spend time prior to filing learning the process of doing so and what it entails. For instance, debtors are required to disclose all of their debts to the bankruptcy court. They should also be disclosed to the bankruptcy trustee as well as to the debtor's attorney.

There is a lot of paperwork that must be completed and filed as part of the bankruptcy process. Debtors must take a credit counseling course prior to doing so, and they must show proof that they completed it. Failure to do so could result in a case being dismissed or otherwise delayed. Debtors must also be sure to fully list their debts and assets as part of a bankruptcy filing.

Can you wipe out recent credit card debt through bankruptcy?

If you are seriously considering bankruptcy as your only way out of debt in Kentucky, you probably already know that a Chapter 7 bankruptcy wipes out your credit card debts as well as virtually all your other consumer debts. What you may not know, however, is that Chapter 7 may not discharge debts that you incur on your credit cards right before filing bankruptcy.

Deep within the Bankruptcy Code lies Section 523(a)(2)(C)(I). This little-known section includes a presumption against the discharge of any single credit card debt you acquire within 90 days before filing bankruptcy if that debt represents consumer goods purchases that total over $675.

Older Americans filing for bankruptcies in alarming numbers

Seniors throughout Kentucky and the rest of the U.S. are filing for bankruptcies in alarming numbers, according to a recent report. After studying data gathered by the Consumer Bankruptcy Project, a group of academics discovered that the number of Chapter 7 and Chapter 13 personal bankruptcy petitions filed by Americans aged 75 or older had tripled since 1991. In addition, filings by Americans between the ages of 65 and 74 had more than doubled. The results of the study were published on Aug. 5 by the Social Science Research Network.

These figures mean that the percentage of bankruptcy filings made by older Americans has increased by almost 480 percent in less than 30 years, and the percentage of Chapter 7 or Chapter 13 petitions filed by Americans over the age of 75 has risen by a worrying 1,000 percent. According to analysts, the rise in these "gray" bankruptcies is largely due to changes in Social Security eligibility, the decline in traditional pensions and the increase in popularity of 401(k) savings accounts.

Debt levels surpass $13 trillion after dropping during recession

When the recession struck in 2008, consumers in Kentucky and nationwide tried to whittle down their debts. A survey conducted in 2009 by the Consumer Federation of America found that the number of people focusing on debt reduction rose to 44 percent from 38 percent the previous year. The passage of a few years, however, has reversed this trend as more people lean on credit to make purchases. As of the first quarter of 2018, household debt had hit a record high of $13.2 trillion.

Low interest rates have enabled people to manage their debt more effectively. Some borrowing has changed a little since the financial crisis 10 years ago. Auto loans and student loans form the majority of people's debts and these balances exceed the debt owed on credit cards. Debt for vehicle purchases appears to have gone up because lenders loosened their standards for financing cars.

Contact the Firm

Get Sound Advice In A Free Consultation

For sound bankruptcy advice you can count on, from a skilled lawyer who truly cares about your future, contact the Louisville Law Office of Allan E. Dunaway, PLC. We have two convenient locations: Louisville, Kentucky, and Jeffersonville, Indiana. Our main office in Louisville is located off the beaten path so you won't have to deal with downtown traffic and can pull right up to our door and walk right in.

Call us at 502-785-1005, or send an email message. Our law firm welcomes the opportunity to serve you in any way we can.

If for some reason personal bankruptcy is not for you, if you do not qualify for the Chapter 7 approach via the "means test" and Chapter 13 reorganization is not the answer, Allan E. Dunaway works hard to inform you of other appropriate means of debt settlement that suits your unique needs.

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