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Debt relief: Pay more than minimum due to credit card balance

Some Connecticut residents and others around the country may be dreading the arrival of their credit card bills this month. It can be easy to overspend during the holiday season, yet difficult to face the aftermath when the statements arrive. Yet those in need of debt relief who already struggling to make ends may only be able to make the minimum payments due each month. Experts share how this practice can affect a person's long-range financial situation.

National reports show that the average household has over $8,000 in debt. Balances of this amount could be paid off in roughly 13 months if consumers applied around 15 percent of their income to the bill. However, credit counselors suggest putting only 5 percent toward the debt, thus lengthening the period of time for repayment. Many cardholders pay only the minimum amount due, which is usually around 1 percent. Using this approach would leave a consumer paying on that $8,000 balance for two decades.

Rising interest rates and seeking debt relief

Many Connecticut consumers have credit cards and use them for everyday purchases. Over the holidays, people tend to spend more money and use their credit cards more often, leading to higher balances. For some people, holiday spending can lead to balances they cannot manage. With the addition of rising interest rates, missed payments and other difficult financial factors, a person may need to look for debt relief options.

For people with credit card debt, it can be a significant problem when interest rates rise. The rates were raised shortly before the new year, and it is possible they could increase two times in 2019. Over the past year, increases in the interest rate has led to increased credit card balances. In the third quarter of the financial year, credit card debt rose by as much as $15 billion.

Debt relief: Year-round approach to alleviating holiday debt

Christmas has come and gone for residents of Connecticut and elsewhere around the nation. However, for many, the bills of making that Christmas celebration merry are beginning to arrive. While some consumers were already struggling with their finances and in need of debt relief, the additional bills are not welcome at all.

Reports show that individuals go into debt for more than $1,000 on average at Christmas. Statistics also note that the average credit card debt per person is the highest it has been in a decade. When you consider that amount is now over $3,300, the added burden from holiday spending certainly does not help. Financial experts have offered one solution to avoid this scenario next year.

Former Top Chef champion files for Chapter 7 bankruptcy

Many Connecticut residents struggle with their finances. While some homeowners or business owners may be feeling "on top of their games," others are struggling to keep their heads above water. For the latter, Chapter 7 bankruptcy might be an option to prompt immediate debt relief and lay the groundwork for getting finances back on track.

Many people can relate to financial problems that necessitate debt relief actions, and celebrities are not immune to such problems either. Mike Isabella, for instance, a former champion on the popular TV show, "Top Chef," recently determined that filing for bankruptcy was the best decision to make regarding his current circumstances. After he rose to fame by winning a Top Chef competition, he went on to become a successful restaurateur, opening a string of restaurants in Washington D.C. and Virginia, worth at least $40 million.

After holiday spending, is Chapter 7 the right option?

Many Connecticut consumers spend a significant amount of money during the holiday season. Starting after Thanksgiving, there is a sharp increase in gift purchases, and many of them are made by credit card. After Christmas shopping and holiday spending, some people may not be able to manage their debt properly. In some circumstances, Chapter 7 bankruptcy may help.

Statistics indicate that almost half of consumers in the United States accumulate a significant amount of credit card debt during this time of year. Almost one third of these consumers use their credit cards to cover holiday travel expenses, while others use credit cards to cover the costs of entertaining people. Of course, the most common reason why consumers accumulate credit card debt this time of year is for buying gifts.

What is different between Chapter 7 and Chapter 13 bankruptcies?

Many recent fiscal indicators have pointed to a more robust economy, such as lower unemployment rates for Connecticut residents and others around the nation. Many households are in a more favorable financial position than they were a year ago. However, there are still those who are struggling just to make ends meet. Some of these consumers may decide that filing for bankruptcy could be the most viable solution to ease their financial burdens. When the decision is reached to file for bankruptcy, an individual has to then determine whether to file for a Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 bankruptcy is also known as a liquidation bankruptcy. A person's non-exempt assets are liquidated, or sold, to pay his or her debts. In many instances, property, such as homes or vehicles, is exempt from liquidation. While this type of bankruptcy lasts only several months, the information regarding it stays on credit reports for up to 10 years.

Debt relief: How credit scores are affected by paying off loans

Many consumers in Connecticut and around the nation are concerned with their credit scores. Higher scores result in more favorable rates for large ticket purchases and a broader selection of options for financing. On the other hand, lower scores may have occurred for those overwhelmed with bills and in situations where they need debt relief. Experts have weighed in on how paying off loans can affect one's credit score.

Financial counselors often recommend paying off credit card balances to boost credit scores. While this strategy works well with credit cards, it doesn't necessarily yield the same increase to credit scores with other types of debt. For example, if someone paid off a mortgage or car loan early, it may actually have a negative impact on a score. With some scoring models, this action may make a person appear less credit-worthy. So it may be more advantageous to keep car, home or other installment loans open to maintain credit scores.

Does filing Chapter 7 or Chapter 13 affect bank accounts?

There have been many signs that the economy is improving nationally, thus creating positive financial outlooks for many Connecticut residents and others around the country. However, for others, there have been continuing monetary hardships with little hope for recovery. Some consumers elect to file for Chapter 7 or Chapter 13 bankruptcy to wipe the slate clean and get a new start with their finances. Regardless of the type someone files, there will be questions about the bankruptcy process and how it may affect one's financial situation.

Many consumers want to know if their checking or savings accounts will be affected by filing bankruptcy. Financial experts say that individuals shouldn't have a problem with maintaining those types of accounts, although each case is unique. In fact, if a person did not have a loan with a particular bank, there would be no reason for that financial institution to even know about the bankruptcy. On the other hand, if there were loans involved, the bank would be aware of the filing.

Debt relief: Credit cards can be useful financial tool

Most Connecticut residents and others around the country see the benefits in maintaining good credit scores. Having high scores is advantageous when an individual seeks to buy a home, vehicle or other large ticket items. For many, opening credit card accounts is an excellent way to establish good financial practices and start building a strong credit history. Unfortunately, some consumers have problems using credit cards over time and may eventually have to seek debt relief to alleviate their financial burdens.

To maximize the effectiveness of using credit cards, it is important to take several points under consideration. First, pay careful attention when selecting a credit card provider. There are major variances in the amount of annual fees and interest rates that are charged by the different companies. Seek out the most favorable deal possible before signing up for a card.

Debt relief: Changes to credit reporting for medical bills

Health care costs have skyrocketed for the majority of Connecticut residents and others around the nation. Despite having insurance, most consumers realize they do not have adequate coverage to pay for treatment of a catastrophic illness or recovery from a serious injury. Many individuals wind up with mountains of medicals bills, significant balances and long-term financial obligations for which they must seek debt relief. However, some recent changes to the way information is sent and recorded on credit reports could alleviate some concerns.

Typically, if someone was hospitalized for an extended period of time, he or she was responsible for the amount of medical expenses not covered by insurance. Many people are unable to pay these balances and collection agencies would get involved. At this point, a person's credit score would suffer and thus affect their future potential to purchase a home or vehicles. A situation like this could take years to resolve, and unfortunately, the damage to one's financial situation is already done.