Thompson Law Group, P.C.

Warrendale, Pennsylvania, Bankruptcy Law Blog

Saving the home a struggle for middle-class families

The middle class was once seen as a stable place for Pennsylvania families. This might no longer be the case. Even individuals who earn steady, stable incomes that put them solidly in the middle class are struggling with more and more debt as time goes on. Although many believe that they can dig themselves out of that debt, this is simply not possible for some. Instead, focusing on saving the home and other important assets might be best addressed through personal bankruptcy.

Wages have not changed much over the past two decades, with the median income per household hovering around $61,372 as of 2017. Considering inflation, these wages are barely higher than in 1999. Despite stagnant wages, the cost of everything from medical care to higher education has skyrocketed.

Which generation struggles the most with credit card debt?

A decade or so ago, credit cards seemed to be one of the last things on millennials' minds. In 2012, only around 40% of millennials in their 20s had credit cards. As of 2019, over half -- 52% -- use credit cards to make purchases. Although it is not entirely clear why this generation shifted its opinion on credit cards, one thing is obvious -- they are having trouble managing credit card debt.

On top of carrying a collective $370 billion for student loans, millennials now have the largest share of seriously delinquent credit card balances. About 8% of balances were categorized as such in 2019's first quarter. However, student loans and other financial practices could part of the reason that millennials in Pennsylvania struggle with financial literacy. Considering that as many entered college, both institutions of higher learning as well as the government aggressively pushed student loans, claiming that the loans were a type of financial aid that would help them get an education.

Can I pay off my credit card debt with a personal loan?

For many Pennsylvania consumers, credit cards help bridge the gaps between paychecks. Others find credit cards useful for making large purchases. Some people simply find it convenient to swipe a card without worrying about the remaining balance. However, credit card debt can quickly spiral out of control, and paying the balance off can end up feeling like an impossible task. Bankruptcy can be an effective option for many individuals in this situation, but personal loans could also help certain people.

Consumers who carry balances on multiple credit cards usually end up struggling to make their various minimum payments. Transferring the balances to either a single card or as few as possible can make it easier to tackle those minimum payments, but it is far from the most effective solution. Credit cards generally have high interest rates, which is one of the reasons they are so difficult to pay off.

Bankruptcy is effective at saving the home

Even if keeping up with the mortgage was easy at first, some homeowners encounter financial problems that make those monthly payments difficult. When Pennsylvania homeowners miss too many payments they may end up facing foreclosure proceedings. While this is often a terrifying situation to be in, foreclosure does not have to be inevitable. When saving the home is a priority, Chapter 13 bankruptcy could be a smart option.

Many people feel embarrassed when dealing with money problems, but this does not mean that they should try and hide the problem. Instead, homeowners should speak directly with their lenders about any troubles they may be having with their monthly mortgage. It is often possible to work out an agreement that not only makes it easier to afford those payments, but to also lessen the chance of foreclosure. For example, some lenders will agree to a forbearance, which temporarily reduces or suspends mortgage payments.

Credit card debt is a growing problem for college students

Debt used to seem like a problem that only people of a certain age  or those who were very poor with money ever dealt with. Now, even young adults in Pennsylvania are finding that getting through life without some kind of debt is not only difficult, but it often seems next to impossible. With a large number of U.S. college students carrying around some type of credit card debt, the problem could get worse for these young adults before it gets better.

EVERGI and AIG conducted a study that involved over 30,000 college students attending more than 440 different institutions. According to that survey, more than 33% of students have a balance of at least $1,000 on their credit cards. The researchers conducting the study used this information to determine that college students have been routinely taking on more and more credit card debt since 2012.

Saving the car is easier than you think

Not everyone realizes that there is more than one type of bankruptcy. After all, portrayals of fictional characters going through bankruptcy often end up being vague, giving only the bare minimum of information. As a result, some people in Pennsylvania might be surprised to learn that saving the car during bankruptcy might be easier than they thought. This is particularly true for those who are filing for Chapter 13 bankruptcy.

In Chapter 7 bankruptcy, a portion of a person's assets are usually sold off to satisfy creditors. After this, the remainder of the filer's debt is discharged. This is not how Chapter 13 works. People who file for Chapter 13 bankruptcy are usually those who have the financial means and income sufficient for a three to five year repayment plan. Unsecured debts left over at the end of the repayment plan is discharged.

Where is all this credit card debt coming from?

Avoiding debt may feel like an impossible dodging act. Whether taking out a loan to attend school or to purchase a vehicle for getting to work, Pennsylvania consumers might struggle to pay off their balances and debts. The problem is especially tricky when it comes to credit card debt. So what's making it so difficult for people to pay off their credit cards?

Advertising is perhaps partly to blame for the meteoric rise in credit card debt. While ads and commercials have been around for plenty of other generations, millennials have to contend with a new world of advertising. No longer are ads relegated to commercial breaks and magazines, but they are now in social media feeds. An Allianz Life survey discovered that 25% of Gen Xers and 50% of millennials had unexpectedly spent money on something because they spotted it on social media.

Credit card debt is a big problem

Having and using a credit card is not inherently bad. Many Pennsylvania consumers use credit cards for added security when making purchases or to earn rewards points for making additional purchases. There are also downsides to using credit cards too, especially when it comes to overspending. For some consumers, ending up with too much credit card debt is easier than they may believe.

American consumers collectively owe $1 trillion on their credit cards. The Federal Reserve reported that in 2017 the average adult had $6,814 in credit card debt alone. While this alone is a significant sum to repay, interest rates can end up ballooning original debts to much larger sizes. Many people end up paying hundreds or even thousands of dollars in interest before fully paying off their balances.

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