College students know that getting a decent education is not going to be a cakewalk, either in terms of their studies or their finances. Unlike in years past, however, students are more frequently coming to expect that their college debt will hound them for years, causing them to likely seekdebt relief in Colorado and across the country.
A number of recent media reports indicate that student loan debt is a problem that has the potential to bubble over into the next major "bust" for our economy.
Standard & Poor's has just released a report detailing the problem, which involves higher education institutions that are receiving fewer endowments and students who are graduating with minimal job prospects, and therefore little hope of paying back their loans. In fact, the Project on Student Debt determined that three years ago, nearly 70 percent of college students were strapped with student loan debt after graduation. For students who attend for-profit or private schools, as opposed to state-run universities, the statistics are even higher.
Students at public universities typically run an average debt of about $20,000, while students at private universities run an average debt of between $28,000 and $33,000.
Last year, a similar report was released by Moody's Analytics, which found that while other sectors of the economy are showing improved health, the student loan sector has not. One of the main problems is that institutions have unrealistic expectations of how much a student will make upon graduation. If they aren't making much, they won't be able to afford to pay down their debt.
This is why having an experienced Colorado debt relief attorney is so critical. Sorting through a mountain of bill notices and harassment from collectors is extremely stressful especially when, through no fault of your own, you're either unemployed or under-employed. This is apparently accounting for an increasing number of our youth, as the National Association of Consumer Bankruptcy Attorneys recently conducted a survey, which found that four out of five bankruptcy attorneys in Colorado and throughout the country are taking on clients for whom student debt is a serious problem.
As the economy continues to rebound at a seeming geologic pace, Colorado Springs debt relief attorneys know that Americans aged 25 and younger still face great challenges finding a path to financial and job security. This two-part series on young Americans and debt will focus on two areas of concern: the economic realities facing many recent college graduates, and minors, credit and financial literacy.
For the recent college graduate, Colorado Springs debt relief lawyers report a troubling outlook. The employment rate for young adults today has dropped to 54 percent -- the lowest since the government began tracking such data in 1948.
The Grand Falls (NY) Post-Star reports that as of 2011, outstanding student loan debt has now exceeded both the $1 trillion mark and our national credit card debt for the first time ever. And, for those college students who graduated with student loans in 2010, on average they carry more than $25,000 in debt into their post-college lives.
Unfortunately, they are carrying that debt into a bleak job market while also frequently bearing other significant debt in the form of credit cards, car payments, even medical bills.
According to a recent survey conducted by the Pew Research Center, for young Americans aged 18 to 34, the recession has done more than drain their bank accounts.
The PRC report further reveals that:
~ 24 percent of young Americans surveyed say they have taken an unpaid job to gain work experience,
~ 24 percent say that they have moved back in with their parents, (among those ages 25 to 29 that number jumps to 34 percent),
~ 22 percent say they have postponed having a baby because of the bad economy, and
~ 20 percent say they have postponed getting married.
Colorado debt-relief attorneys with the Law Office of Stephen H. Swift understand that the financial pressures facing young Americans today can seem overwhelming. With that said, we have been helping people achieve debt relief for more than 20 years. During that time, we have helped thousands of Colorado residents make a new financial start by eliminating or reducing their debts. Call us today at (719) 520-0164 to schedule a free consultation.
If you've had a few problems paying the bills lately, you are not alone. Tens of millions of Americans have blemishes on their credit reports that are serious enough to prevent them from obtaining credit cards and loans. It's easy to feel helpless during these times, but you can take some positive steps right away to repair the damage.
Even if your credit is satisfactory, but you would like to improve it, it is worth reading this article. The better your credit, the less you will pay in interest and typically insurance rates as well.
Before you can improve your credit, you must first know where it stands at this moment. It is possible to obtain free credit reports once each year, but you might have to pay to see your FICO score. Be sure you use a reputable service to get current credit reports from the major credit reporting agencies – Equifax, Experian and Trans Union.
Here are some quick tips for speedy credit repair:
One reason for a low credit score may be a lack of credit history, and don't fall for the myth that you must carry a balance in order to get good scores. Using a credit card or two and paying it off every month is the best way to establish a credit score. If a regular credit card is denied due to "lack of credit history," consider getting a secured card. This is where the bank gives you a credit limit that is equal to a deposit you make in advance.
Get an installment loan
Your credit score will improve fastest if you can show your level of responsibility with both major types of credit – revolving (credit cards) and installment (personal, auto, student and mortgage loans.) If you don't have one already, consider adding a small personal loan that can be paid off over time. Small community banks and credit unions are the best place to start, and look for loans that report to all three credit bureaus.
Pay down your debt
Making that final payment on your auto, student or mortgage loan is a great way to boost your credit score, but not nearly as much as paying down – or paying off – revolving debt such as credit cards.
Ideally, a lender wants to see a big gap between the amount of credit you are using and your available credit limits, so if you've been paying your bills on time it may be wise to ask for an increase in your credit limits. Debt experts recommend that you pay down the cards that are closest to their limits first, even before the highest-rate card.
Use credit cards lightly
Any time you rack up a big balance on a credit card, it can hurt your scores. This is because the balances reported on your last statements are used to calculate credit scores, and this is what is typically reported to the credit bureaus. A good idea is to limit your charges to 30 percent or less of the card's limit; with 10 percent being even better. If you regularly use up more than half your limit on a single card, consider using several cards to ease the load, or making a payment before the statement closing date.
Check your credit limits
Your scores might be artificially depressed if your lender is showing a lower limit than you actually have. Most credit card issuers will quickly update this information if you ask. If your credit card issuer makes it a policy not to report consumers' limits, the bureaus may use your highest balance as a proxy for your credit limit.
This means if you consistently charge the same amount each month -- say, $2,000 to $2,500 -- it may look to the credit-scoring formula like you're maxing out that card every month.
If you have an American Express charge card -- the kind that must be paid in full every month, rather than the kind on which you carry a balance -- you probably don't have to worry, because charge cards typically aren't included in the credit utilization portion of the FICO formula.
Get some goodwill
If you've been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a "goodwill adjustment" improve the better your record with the company. A longer-term solution for more-troubled accounts is to ask that they be "re-aged." If the account is still open, the lender might erase previous delinquencies if you make a series of 12 on-time payments.
Dispute old negatives
You may have fought with the phone company over an unfair bill a few years back, resulting in a collections account, but that may be fixable. Continue protesting that the charge was unjust, or try disputing the account with the credit bureaus as "not mine," and be persistent about this. The older and smaller a collection account, the more likely the collection agency won't bother to verify it when the credit bureau investigates your dispute.
Correct significant errors
Your credit scores are calculated based on the information in your credit reports, so certain errors there can really cost you. Not everything that's reported in your files matters to your scores, but there are a few problems that are worth correcting.
Correcting your credit report now will save lots of time later, especially if you are planning to apply for a car loan or mortgage within the next year. By the time most consumers realize they have a problem with their credit score, it is already affecting their interest rates and credit availability. Be smart about your credit score and check your credit reports regularly.
Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net
Collection agencies are becoming increasingly aggressive with their tactics, as evidenced by a soaring number of lawsuits filed by individuals who have been harassed by these companies.
Colorado Springs Chapter 7 bankruptcy lawyers know that these businesses can be brutal - calling you at all hours of the day and night, on every line you own, even going so far as to contact family members, neighbors and relatives.
You have the right under the Fair Debt Collection Practices Act to request that these communications stop by sending what's known as a cease communication letter. You can ask that they only communicate with you in writing or that they cease contact with you altogether.
However, many companies will flagrantly ignore this request (and the law) by continuing to contact you. This is where their conduct stems into the territory of harassment and abuse, and that's where a lot of these lawsuits are coming from.
It's noteworthy that when you file for a Chapter 7 bankruptcy, the court issues what's known as an automatic stay. This is spelled out in 11 U.S.C. 362, and it essentially bars the continued communication of your debtors to you for a period of time while your bankruptcy proceedings are being processed.
According to the Transactional Records Access Clearinghouse, there were nearly 900 consumer credit lawsuits filed just in May of this year alone. Those suits were filed in all 50 states and throughout some 90 federal court districts.
What that number reflects is a 12 percent increase over April of this year - and it's grown every month since the beginning of this year.
The number of consumer credit lawsuits has actually tripled in the last five years, beginning in May of 2007. From January through May of this year, nearly 6,300 of these suits have been filed.
Some industry analysts say that the debt collection business is fast-growing. Along with it, there is the misuse of consumer information, as well as the ignorance of the Fair Debt Collection Practices law.
Every small business owner has dealt with his or her share of debt, but with tighter lending rules some borrowers are struggling to stay out of bankruptcy court. It seems like since the "official" end of the recession, everything from health care to raw materials have been getting more expensive, which has placed an undue strain on entrepreneurs. The New Year is a good time to take a long hard look at where your business is financially and what you can do to dig out of debt.
Thankfully, the need for bankruptcy protection has decreased significantly since 2010, but a bankruptcy lawyer can still help the struggling small business. The Colorado Springs bankruptcy law office of Stephen Swift offers debt relief for small business owners who want to get a fresh start through a Chapter 7 or Chapter 13 bankruptcy filing. But there are still some steps that can be taken to avoid this. Here are some methods recommended by Entrepreneur Magazine from an article entitled "6 Ways to Dig Out of Debt."
Attack unnecessary costs
Take steps to identify what has contributed to the explosion of your company's debt. For example, if customers aren't paying on time consider ramping up collection efforts, or if your expenses are too high then consider relocating to a less expensive office space. Sell unused equipment or ditch a costly phone system. You may be surprised at how much money can be saved by simply eliminating expenses.
Create a new budget
If your company's current budget isn't working, then consider starting from scratch. Create a new budget that addresses the immediate needs of your business, with the goal of correcting your financial dilemma. In this new budget, be sure your current revenues more than cover your fixed costs, and then allot a portion of the budget for variable expenses. Financial planners and accountants recommend that whatever is left over is used to pay down debt. This means paying more than the minimum payment on credit cards. Also, if you are not currently using accounting software like MS Money or QuickBooks, now is the time to start doing so. These inexpensive programs can be a great way to stay on track with your new budget.
Prioritize your payments
Just as you would with your personal accounts, tackle the highest-interest debt first. More than likely, this will mean focusing your energies on paying down credit cards but remember to pay off any debt that you've personally guaranteed for your business. If a supplier or creditor can come after your personal assets, these debts should be a top priority as well.
Talk to your creditors
Sometimes it is beneficial to speak with your creditors directly, letting them know that your business is in financial hardship. Many of them will offer a hardship plan that has better payment terms, or you could request a reduced settlement amount. When you speak with a creditor, make it clear that the more flexible they can be, the faster you will pay off their debt; but be sure you keep up with your end of the bargain. As any bankruptcy lawyer will tell you, the worst thing a business owner can do is to set up a repayment plan and then default on it.
Consolidate your debt
Whenever possible, try to consolidate several smaller loans into one loan with a lower interest rate. Not only will this allow you to reduce monthly costs; it will help you dig out of debt without harming your credit score. If possible, consider combining several shorter-term loans into one longer-term package.
Seek advice from professionals
Negotiating with your creditors can be very stressful at times; especially if the creditors are uncooperative. If this is the case, consider asking for help from a credit counseling organization. Many of these nonprofit organizations will only offer debt-management services to consumers, but there are a few that will work with small business owners as well. For more complicated debt problems, a credit counselor may recommend speaking with a Colorado Springs bankruptcy attorney.
Photo Courtesy of David Costillo Dominici / FreeDigitalPhotos.net
As a Colorado bankruptcy attorney, I hear this question more than many others. How can bankruptcy be avoided? But before a client even lands in my office for a consultation, another question might have been asked: How can I pay off all this debt? Well, there is no silver bullet, no easy answer that won't require a disciplined approach, but when one is willing to make the sacrifices there is usually a way to get that debt paid down.
According to a recent article by the Motley Fool, "9 Ways to Pay Off Debt," you can throw a lot of energy at your personal debt but it won't just disappear. With annual rates of 20 percent or more, compounded monthly – debt hovers over some individuals like a "carrion bird." As the article suggests, it cannot be wished away but it can be paid down with a lot of determination, some debt-fighting resources and possibly the goodness of a few wealthy relatives.
Here are some of the Motley Fool's suggestions:
Pay more than the minimum due.
This is an important habit, according the Motley Fool. The minimum payment is only about 2 to 3 percent of the balance due, and it is clearly calculated in the bank's favor so they can get more interest. This means less cash in your pocket. Don't fall for it. Instead, pay as much as you can each month even if it means eating at home or bringing your lunch to work. Be willing to make a few sacrifices and you will have the means to increase your payments against debt. When you see that balance going down every month it will be an incentive to keep it going.
Snowball your credit card debt.
Figure out which credit card has the lowest interest rate, and then transfer as many balances to that card as possible. If the entire balance cannot fit onto one low interest card, pay at least the minimum due on all cards except one, then make the largest debt payments on that one card. When that balance becomes zero, move to the next card and tackle it the same way.
This "lather, rinse, repeat" method is also known as "snowballing" because as the debts decrease the amount of money you have to pay them off increases. This keeps happening until all the debt is wiped out. Many people take advantage of promotional offers that banks use to entice them into a line of credit. It may be worth considering, especially when you're moving an 18% card down to 5.9%, just as long as you apply the money saved on interest into paying more against the principal. Just take the time to examine each offer closely and look out for "hooks." You may need to switch your balance again after the introductory period expires, resulting in a higher interest rate than you are paying now.
Cash out your savings account.
Many people believe that having a savings account is more important than getting out of debt. Newsflash: it isn't. Savings accounts are great, but keeping money in a low-yield account is never smarter than paying off high-interest debt. Think about it. Draining your savings account may seem scary, but if it saves you a few hundred a month in credit card interest isn't it worth it? The higher the interest rates are on your credit cards, the more attractive it becomes to choose repayment over investment. The same concept applies to investing in your 401(k). If you are trying to reduce your taxable income and nearing retirement it makes sense to keep investing, but if you're young and your income isn't that high yet, pay off your debt before increasing your investment in retirement accounts.
Ask for a loan from family and friends.
This might seem a little uncomfortable, but chances are you will get a much more favorable interest rate from family members than you would from a bank. They might even tolerate a late payment or two. But it is very important to keep your word and put your agreement in writing. The last thing you want to do is destroy an important relationship over money. Loans between family members can quickly become a source of hard feelings, so you must remain scrupulous about adhering to the payment schedule.
Get a home equity loan.
If you own your home and you have accumulated enough equity, it might make sense to get a home equity loan or home equity line of credit (HEL). This strategy allows you a few ways to save. First of all, you will trade your high interest credit card debt for a 6% to 7% interest rate. Secondly, if you itemize deductions on your tax return, home equity interest counts as mortgage interest. The only caveat with this approach is you cannot look at this loan as a windfall, or as an excuse to continue living beyond your means. Only use the proceeds to pay off debt, and resist the temptation to accumulate more debt. Many HEL borrowers fall into this common trap and then find themselves paying off the HEL on top of new credit card debt. The trick is to pay off the cards and keep them paid off until the home equity line is repaid.
For more tips on paying off debt to avoid bankruptcy, look for our follow-up article later this month.
Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net
If you are struggling with consumer debt such as credit cards, auto loans and student loans, it is important to be very cynical about quick debt relief strategies. Many consumers will simply "Google" a debt solution and click on the first ad that looks credible, but what they may not realize is how many companies are really out to cash in on their misfortune. But where can a person find the right credit counseling service or debt settlement without risking personal bankruptcy? It turns out that the Federal Trade Commission (FTC) offers a wealth of advice on their web site.
Depending on the type of service you need, several solutions are outlined on "Coping with Debt" page of the FTC's web site. (http://www.consumer.ftc.gov/articles/0150-coping-debt#debt) But before you sign an agreement with a debt relieve service, it is still important to check with your local consumer protection agency or your state Attorney General. These organizations can tell you about any consumer complaints on file and let you know if the company has the required licenses to work in your state.
If you think you need help to stabilize your finances, take the time to do some homework and ask questions. Find out what the business provides and how much it costs, and don't rely on verbal promises. A good credit counselor should be upfront about potential issues that might arise with your credit score and how long it might take to get the promised results. Be sure to get everything in writing and read your contracts carefully before signing.
What to expect from credit counseling
A reputable credit counseling service can help you manage your debts, develop a workable budget and offer workshops or educational materials. Counselors are trained in consumer credit, debt management and budgeting. Their certification allows them to develop a personalized plan to solve your financial issues. Typically, the first session lasts about an hour, but several sessions might be required to put a plan into place.
The majority of counseling services are set up as non-profit organizations that offer services through local offices but some offer online and phone counseling as well. The best case scenario is always to meet with a counselor face to face. Look for a credit counselor at larger universities, credit unions and military bases, or ask for a recommendation from your financial institution or local consumer protection agency.
A note of caution on non-profit organizations: Having non-profit status doesn't guarantee their services are free, or even legitimate. Some credit counselors charge high fees which may be hidden or they ask for voluntary contributions from clients. Steer clear of these services.
What is a debt management plan?
Rather than helping you pay the bills yourself, a DMP will require you to deposit money with their organization and they will pay your unsecured debts. The benefit of this is that creditors may agree to lower interest rates. The only condition is that you must not use or apply for any new credit while still enrolled in the DMP, which could take 48 months to complete.
If your finances are out of control and you lack the income to repay your debts, a counselor might recommend enrolling in a debt management plan (DMP). Unless a certified credit counselor has thoroughly reviewed your case, don't sign up for this type of plan. While it may work to reduce debt quickly, it could have a lasting impact on your credit score.
What is a debt settlement program?
Debt settlement might look similar to a DMP, but they are only offered by for-profit companies. The idea here is the company negotiates a smaller lump sum payment of your debt that is less than what you owe. In order to make that payment, the program requires a specific amount of money is set aside each month in savings and transferred into an escrow account until the payment can be made, but it also requires clients to stop making payments directly to creditors.
While a debt settlement firm might be able to settle your debts, it can take a long time to complete the process. Oftentimes, these programs require deposits into a special savings account for three years or longer before all the debt can be settled. Before signing up for such a program, be sure to review your budget carefully and make sure you can keep the payments up for the full term of the agreement. Also, keep in mind that creditors are by no means obligated to settle your debts, and you could continue to accrue interest on some accounts before they are paid off. Because the program will discourage you from sending payments to creditors, your credit could be severely impacted.
Another way to reduce the cost of credit is through consolidation loans, particularly with a second mortgage or home equity line of credit. These loans may seem attractive but they require your home to become the collateral. This means you could potentially lose your home if the payments are missed or late. In addition to interest on a home equity loan, you will also have to pay points. Each point is equal to one percent of your loan amount. While they may be tax deductible they can still increase the cost of the loan.
Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net
Because reports of skyrocketing medical costs span both statewide and national news, Denver debt-relief attorneys were not surprised when a recent Centers for Disease Control and Prevention national health survey revealed that one-in-three American families are feeling the financial pinch of outstanding medical bills.
Of that same group, the CDC reports that one-in-five families are struggling to pay down their outstanding medical bills, while one-in-10 families are simply unable to pay any portion of medical debts at all.
Overall, MSNBC reports that nearly 39 percent of families with children aged 17 and younger are experiencing financial stress linked to medical care, including bills that are being paid down over time and bills they just can't pay, period.
In one notable -- if not ironic and certainly tragic -- instance, South Florida small-business owner Mary Brown, who is perhaps best known for her outspoken stance against the Affordable Care Act, is herself now seeking personal bankruptcy protection. The Kansas City-Star reports that about $4,500 of her $60,000 consumer debt is unpaid medical bills.
Meanwhile across the country, the Sacramento Bee reports that the number of Northern California hospital stays resulting in charges of $1 million or more rose from 430 in 2000 to almost 3,000 during 2010. The article spotlights three achingly-familiar storylines:
~ a gas station attendant diagnosed with liver cancer,
~ a new mom whose premature son has spent the first four-and-a-half months of his life in the hospital, and
~ the fast-food worker whose near-fatal car accident has left him $1.3 million in debt.
Hospital officials and health experts both say they expect the growth in million-dollar hospital charges to continue thanks, in part, to an exploding aging population reluctant to seek medical care until a health issue has reached a critical stage. Pair that with sharp and ongoing increases in medical staff pay; costly, necessary and frequent add-ons to infrastructure (think: high-tech/high-dollar equipment); and, the fact that hospitals charge a premium for critical-care services, and the cost-of-care boom makes sense.
Colorado bankruptcy lawyers know that for families struggling to stay solvent, health issues can be exacerbated by the stress of how to pay for them. We are here to help. For a free initial consultation with the Law Office of Stephen H. Swift, call (719) 520-0164, today.
Denver bankruptcy attorneys were not surprised to read that a 2011 national consumer complaint survey found that out of 1.8 million consumer complaints, debt collection trailed only identity theft for lead complaint category. In this two-part series on dealing with personal debt, Colorado debt-relief attorneys break down the numbers for common consumer complaints and offer tips on dealing with debt collection calls.
According to the Federal Trade Commission report, identity theft complaints captured 15 percent of all consumer complaints filed in 2011 with debt collection claiming second place at 10 percent. Nationally, the 'Top 10' consumer complaints and their rankings are as follows:
Further, the FTC report indicates that across Colorado, consumers registered 28,854 complaints (33,010 if you include identity theft complaints) in 2011. Of those, debt collection topped the list by a comfortable margin. Statewide, the 'Top 10' consumer complaints and their rankings are as follows:
According to the Coloradoan, Colorado had the highest per capita consumer complaint rate with 573.7 complaints filed per 100,000 residents, and was followed by Delaware and Maryland, respectively. At least one Colorado-based consumer expert attributes the high number of statewide complaint filings to better consumer awareness.
If you or someone you know has been plagued with harassing debt collection calls, Colorado Springs bankruptcy attorney Stephen H. Swift can help you navigate the bankruptcy process and reduce the financial stress facing many Colorado residents today. To schedule a free confidential consultation, call (719) 520-0164.
Banks continue to reach into consumers' pockets for anything they can, regardless of whether it is going to require people to seek debt relief in Colorado or elsewhere as a result.
Now, Southern Colorado debt relief attorneys are somewhat encouraged to hear of an announcement made by the U.S. Consumer Bureau chief, who says the agency plans to go after banks for their outrageous overdraft protection fees.
Chief Richard Cordray, who recently took over the post, said the agency is also going to be asking for thoughts from the general public on how these fees are worded on checking account statements.
Cordray was quoted by CNN Money as saying that the way banks initiate overdraft fees has resulted in severe financial harm to people who are often the least able to afford it.
Banks have tried to defend themselves by saying the overdraft fees are put in place to spare their customers from being embarrassed when a purchase is denied because there isn't enough money in their account. But when that transaction is completed, the person is hit with penalty fees that generally range between $30 and $35 - sometimes for a purchase that may be just a few dollars. The example given was when a $3 cup of coffee becomes a $40 cup of coffee, due to overdraft fees.
Recent research by the Federal Insurance Corp. determined that in 2008, people who overdrew their accounts more than 20 times annually paid more than $1,600 in overdraft penalties. This is especially alarming when you consider that someone who is likely to overdraw their account that many times is probably someone who is struggling with debt in Denver or elsewhere.
That report spurred action that caused the banks to ask whether customers actually want overdraft protection - instead of signing them up automatically - but banks can still automatically enroll people for overdraft protection for online bills.
Another aspect that the bureau intends to look at is the common bank practice of clearing large purchases before smaller ones. This is a banking strategy that makes it more likely that a customer will overdraft on several smaller purchases - triggering even more fees.
The final part of the bureau's investigation is going to focus on why so many of these fees come down especially hard on younger and low-income consumers. In fact, nearly 47 percent of younger bank customers were at some point slammed with overdraft fees. Of those, more than 15 percent had higher than 10 overdrafts annually.