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Eugene Bankruptcy Law Blog

Bouncing back from Chapter 7 bankruptcy

Many consumers who are struggling with debt in Oregon believe that filing for bankruptcy would make their problems even worse. This is not necessarily true for those with a lot of unsecured debt since many people who file for bankruptcy find that their credit scores begin to go back up quickly after bankruptcy.

A study by LendingTree found that 43 percent of debtors who filed for bankruptcy had a credit score of 640 or greater within a year after filing for bankruptcy. Within two years, 65 percent of debtors had a credit score above 640.

First credit card? Avoid these rookie mistakes

Getting your first credit card is a pretty big deal. After years of watching the adults in your life confidently talk about bills and credit scores, it's finally your turn to rise to the challenge. At the same time, it is easy to get swept up in the excitement of swiping away. While a credit card can help you make purchases you cannot afford, leaning on it as a source of affordability can land you more debt than you may be prepared for.

To save yourself unnecessary financial trouble, you may want to take note of the common mistakes first-time credit card holders make:

How the wage gap feeds into the debt gap

Oregon residents and others may be aware of the wage gap. However, they may not know that there is also a debt gap between men and women. On average, women have higher student loan, auto loan and credit card balances compared to men. Those who are trying to get out of debt should start by paying back the balances with the highest interest rates.

This generally means starting by paying down credit card or private student loan debt. In some cases, it may be necessary to get a second job or take on some sort of freelance work that can help generate extra income. Other ways to find money to pay back debt include living in a less expensive apartment or cutting back on other unnecessary items. Individuals will ideally create a budget to determine what their current expenditures are and how to cut back on them.

Managing money after having a child

Having a baby is something many young people dream about for years before it happens. Having a little one to take care of can lead to some of the most rewarding moments life has to offer. In the meantime, though, there are almost sure to be financial strains while you adjust to life with the newest member of your family.

Sticker shock from a new baby is undoubtedly real. Most young parents are aware that their lives will change, and their budgets will need to adjust, but few realize just how expensive a baby is. Trying to stay financially secure is difficult, but it is possible with the right preparation.

Tips for paying off medical debt

Medical debt may represent a significant financial challenge for some Oregon residents. The Kaiser Family Foundation found that in 2016, around 20 percent of people who were of working age and who had insurance said they struggled to pay medical bills in the past year while a 2017 study found over 40 percent said they struggled to afford the deductible.

However, there are steps people can take to pay off bills. If the situation is a non-emergency one, people may want to use the Healthcare Bluebook to research the average cost of a procedure and then call the medical facility to see if the price can be negotiated if it is higher. It may also be possible to set up a payment plan for a medical debt. People should talk to the provider's billing office to do this, but they should not agree to get a loan or credit card from a financing service since these are not interest-free.

3 tips for rebuilding your credit

If you have significant credit card debt you may feel like you are drowning and will never recover, but this is not true. While credit card debt is serious, there are ways you can repair your financial situation and dig yourself out of the hole you are in.

You may want to consider declaring Chapter 7 bankruptcy in order to get your credit back in order. Your credit card debt can be discharged when filing Chapter 7. However, after you file, you will still need to work on rebuilding your credit. Even though your debt is discharged, your credit score will take a hit during bankruptcy.

Alternatives to credit card debt settlements

Debtors in Oregon may try to settle their credit card debt for less than what they currently owe. They can choose to do so either on their own or with the help of a debt settlement company. However, there is no guarantee that credit card companies will agree to reduce a debt balance. If some or all of a balance is forgiven, it may need to be reported as income on a future tax return.

There are other ways to resolve significant credit card debt. For example, individuals could choose to speak with a credit counselor about ways to pay it off in full. A hardship waiver could result in lower interest rates and fees charged on an existing debt. Debtors might also get a lower interest rate simply by asking for one or by initiating a credit card balance transfer.

Some experts say bankruptcy filings should not be delayed

Some Oregon consumers might be struggling with debt but may hesitate to file for bankruptcy. Many people may feel it is more honorable to pay debts and that filing for bankruptcy will stigmatize them. However, bankruptcy is a tool that is intended to offer people a fresh start. Many experts say waiting to file leaves people financially depleted and less able to take advantage of the benefits.

A study from the Notre Dame Law Review identified "long strugglers" as people who went two years or longer forgoing basic necessities and struggling with asset depletion and lawsuits rather than filing for bankruptcy. Some people spent five years or more in this position. Compared to those who filed bankruptcy before this two-year mark, they had half as many median assets. They had a 40 percent higher debt-to-income ratio than other debtors, and about half faced debt collection lawsuits compared to just over one-third of other debtors.

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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 19 years.

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