Law Offices of Jennifer LaRese, LLC
Call Today 203-583-8668

Larese Law Blog

Debt relief: Proposal to cap credit card interest rate at 15%

Many Connecticut residents and others around the country carry a significant amount of credit card debt from month to month. If those consumers were told the interest rate for their credit cards was to be capped at 15%, it would apparently be good news for them at first glance. Since some of the cardholders with large balances are often in need of debt relief, this seems like a positive move for them. However, that plan could end up causing more financial strain on the very people it seemingly would help.

Some of the early contenders in the 2020 presidential race have discussed a plan to cap credit card interest rates at 15%, lower than the current total average of 17.73%. While this measure is not expected to pass immediately, some candidates are wanting to introduce their policies in this manner. The current average credit card debt per household is over $9,300. Those consumers who may take years to pay that balance off could benefit from a lower interest rate. The lower rate could considerably reduce the amount of interest paid over time.

Debt relief: National credit card debt at record level

According to 2018 year-end reports from the Federal Reserve, total revolving debt for the nation has exceeded $1.05 trillion. Of that amount, credit card debt accounts for $870 billion of the total. Connecticut residents and others across the country have nearly 480 million active credit card accounts. While some consumers are able to pay off their balances each month in full, others may just be trying to keep their heads above water financially and are in need of debt relief.

These numbers represent record levels of both credit card debt and the number of cards in circulation. Another statistic of concern is that the year-end increase in credit card debt was the largest increase of any category of household debt. Experts are concerned that credit cards are not being managed properly.

Chapter 7 or Chapter 13? Which type of bankruptcy to file?

The news is full of stories about the improving economy for our nation. It is not uncommon to hear stories about lower unemployment rates and increased levels of disposable income. However, many Connecticut families are still mired in financial struggles. Some have reached the decision to file for bankruptcy to get their finances back in shape. Once that major decision has been made, there is still another one to consider -- should someone file for Chapter 7 or Chapter 13 bankruptcy?

In general terms, bankruptcy is a process that helps consumers or businesses with their debts. There is a federal Bankruptcy Code with chapters describing the terms and process involved for each type of bankruptcy. Several of the chapters pertain strictly to businesses. The primary types for consumers are either Chapter 7 or Chapter 13. Making the decision to file for bankruptcy is a major one, so determining which type will be most beneficial is also a critical step.

Debt relief: National credit card debt over $1 trillion

Credit cards are a common financial tool for most Connecticut residents and others around the country. Many consumers love the convenience of using a card to buy items or services, while others enjoy amassing points to gain rewards from purchases. However, rampant or uncontrolled use of credit cards can lead to problems. To avoid the need for debt relief, experts warn against the danger of having too much credit card debt and how to eliminate it.

As a nation, the total credit card debt has now exceeded $1 trillion. The Federal Reserve reports that the average household credit card debt is over $6,800. This type of debt is expensive to carry and can continue to grow if not addressed. If an original purchase price is not paid off in full each month, interest is added to the balance. If only minimum payments are made, it can take years to pay off the original purchase with high interest charges assessed.

Many consumers lack funds to file Chapter 7 or 13 bankruptcy

Many residents in Connecticut and all around the country are anxiously awaiting their tax refunds, if they were so fortunate to receive one. While some taxpayers plan to use their refunds to go on vacation or remodel their homes, others may decide to save the money or use it to pay off some bills. However, there are individuals who need the refunds to help them take the steps toward getting their finances back on track. This group of people has waited for the refunds to file for a Chapter 7 or Chapter 13 bankruptcy because they could not afford it before.

Reports show that bankruptcy filings increase during this time each year, indicating that people use their tax refunds for this purpose. When individuals do not have the funds to file for bankruptcy, their situations often become even more grim. There are areas where phony filings occur or payment plan scams are offered, leaving consumers in worse financial shape.

Debt relief: Take steps to reduce debt, start saving

When most people speak of debt, it is usually in negative terms. However, financial analysts do not see all debt as inherently bad. In fact, increases in consumer and business debt are often viewed as signs of a growing economy. Eventually, however, debt relief may be sought by Connecticut consumers and others around the nation when the level of debt has created financial problems for them. Experts strongly suggest taking steps to eliminate consumer debt in order to achieve other long-term financial goals.

Recent reports show that Connecticut ranks fifth in the country for the average number of credit cards owned, at 3.23 each. A related statistic revealed that the state has the third highest national average credit card balance, at over $7,200. Maintaining monthly balances prevents consumers from saving money, whether for emergency situations or retirement.

Debt relief: Cities with the highest average credit card debt

Recent data revealed that consumers in this country have exceeded $1 trillion in credit card debt. This translates to roughly $9,000 of debt for each household, according to reports. Understandably, this has propelled many families across the nation into the need for debt relief. There are, however, several cities that far exceed the average level of household debt. Unfortunately, two cities in Connecticut are in the top 10 in the nation with the highest averages.

Darien, Connecticut, has the distinction of having the second highest average household credit card debt in the country. At $28,714, this amount is significantly over the average household debt nationwide. Number six on the list was Westport, Connecticut, with an average of $25,627. The reports, from an online financial website, compiled data from the Census Bureau, Federal Reserve and credit-reporting agencies. They showed that many cities that fell within the top 10 were in states that typically have higher taxes and expenses.

Steps to take after a Chapter 7 or Chapter 13 bankruptcy

Despite several reports of the improvement in the national economy, there are many Connecticut families that are still having financial problems. There are individuals who are unemployed, while others may be faced with unforeseen medical bills or mountains of credit card debt. Regardless of the reasons, there are consumers who are overwhelmed with their current monetary situation. At this point, some have reached the decision to file for either Chapter 7 or Chapter 13 bankruptcy.

Certainly, a person has to determine which type of bankruptcy is better for them. Chapter 7 bankruptcy is characterized by a liquidation of assets where many debts are discharged. Chapter 13 involves establishing a repayment plan to pay back creditors. With either type, there are ways to begin building back financial strength.

In need of debt relief? Time for some financial spring cleaning

Spring has arrived in Connecticut and all across the nation. Many individuals set apart time for "spring cleaning" and give their residences extra attention as they begin a new season. This process can be applied to someone's budget as well. Some consumers are in need of debt relief because their finances have been left unattended, and credit card balances have continued to mount. Experts recommend developing a plan to clean out debt and get one's financial house back in order.

Many people establish a goal and use it as a motivating factor as they try to eliminate their debt. For example, some may reward themselves with a dream vacation or home remodeling after they are no longer burdened with debt. The individuals are also rewarded with the knowledge that they can make these major purchases with no interest or fees compounding.

How is Chapter 7 bankruptcy different from Chapter 13?

Often, the news is filled with reports of how the nation's economy is improving. Statistics are presented that show higher employment figures or lower rates of inflation. While these are positive indicators, some Connecticut residents still find themselves in dire financial situations. These consumers may be considering bankruptcy as a means to get a fresh start with their finances. Therefore, it is important to understand the differences between filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy.

Chapter 7 bankruptcy is characterized by a total liquidation of one's debts. Basically, a person's assets are sold, and the proceeds are used to pay creditors. However, if someone has too much income or assets, he or she would be ineligible for Chapter 7. In most cases, only items deemed necessary for basic living would be exempt from liquidation. In this type of bankruptcy, there is no option to repay the debts.