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Orlando Bankruptcy Law Blog

Did this myth contribute to your credit card debt?

The elusive credit score -- countless consumers across Florida are constantly trying to improve their scores. After all, better credit score can lead to better financial opportunities, like home mortgages and lower interest rates on credit cards. However, one pervasive myth may actually be hurting consumers and pushing them to accumulate unnecessary credit card debt.

Many people believe that carrying a constant balance on a credit card will improve their credit score. There are five main criteria used to determine a credit score, and none of them involve carrying a balance. However, as this myth encourages consumers to keep money on their cards rather than paying them down, it could influence one of those criterion -- how close a person is to their spending limit.

You can keep important property during Chapter 7 bankruptcy

For those in dire financial straits, bankruptcy is usually the best option for debt relief. Chapter 7 bankruptcy is a popular choice for many people in Florida, as, unlike Chapter 13, it does not require a repayment plan before debts are discharged. However, many debtors worry that they will have to give up every last asset they own in order to take advantage of this process. 

Chapter 7 bankruptcy requires the debtor to hand over non-exempt property, which is then sold. The funds from these sales are then paid out to satisfy some of the person's creditors. While yes, this means that some property will have to go, it does not mean that an individual will have to give up every last item he or she owns. 

Behind on house payments? You have options

Buying a house is a monumental achievement. Putting down roots, raising a family and building a thousand tiny memories all help transform that house into what most people in Florida truly crave -- a home. When faced with the possibility of losing that home, most people are unaware that they have options even if they are behind on house payments. 

The fiscal year that started in July 2008 was the worst for foreclosures in Florida. By the end of June 2009, approximately 403,000 people had received notices of foreclosure, and another 337,000 homes faced foreclosure between then and the 2010 fiscal year. In 2007, about 284,000 homeowners were faced with foreclosure. All of this compounded to about 1 million Florida homes that went through foreclosure during the Great Recession, one of the hardest hit in the nation. 

Household debt can make you behind on house payments

Mortgages typically comprise the largest chunk of the average Florida household's debt. However, they are not necessarily the largest financial obstacle when it comes to repaying debt. Still, as other forms of debt mount, the possibility of falling behind on house payments may be a reality. 

During the 2008 recession, peak household debt hit $14.7 trillion. Household debt has already surpassed this amount and is set to soon hit $15.7 trillion. Unlike in the past, mortgages represent a relatively small portion of that debt and may be less worrisome than in years past. 

Putting off debt relief? You might be making things worse

The bills show up in the mailbox every day and collectors call nonstop, but still some people delay filing for bankruptcy. Although Florida debtors might put off seeking debt relief for different reasons, the outcomes are sadly similar -- even higher amounts of debt as individuals face rising asset depletion. In many instances, delaying bankruptcy usually has far more negative impacts than filing usually does.

A recent study using data from the Consumer Bankruptcy Project showed that people's financial situations worsen the longer they delay filing for bankruptcy. So-called long strugglers -- those who put it off for at least two years -- usually have about half the amount of assets when compared to other people filing for bankruptcy who did not wait. These long strugglers also have a debt-to-income ration that is 40 percent higher on average when compared with other debtors.

What is the best thing to do with my house in a bankruptcy?

People who file for bankruptcy have several options when it comes to the house they are making mortgage payments on. In ideal cases, they could have been making regular house payments all along and not have even one late payment. Instead, it is credit card bills or medical bills that have gone unpaid.

In such cases, you may be able to keep your house with no problems finding the money to pay for it. In other situations, other things could happen.

Is there any debt relief from student loans?

Student loans are some of the most difficult debts to manage. The average Florida resident with a student loan may owe thousands or tens of thousands of dollars -- more than they could ever hope to repay, even with a good job they secured because of their degree. Even worse perhaps is the common knowledge that there is typically no debt relief from these loans during bankruptcy. However, things could be on the track to change.

Before 1976, debtors could discharge their student loan debt through bankruptcy. That year Congress changed the law, requiring at least five years of repayment before discharge was possible. This requirement was later lengthened to seven years. In 1998, it became practically impossible to discharge student loans unless a person could demonstrate that repayment created an undue hardship. Congress extended this requirement to student loans in 2005.

How are Veterans disability benefits handled on the means test?

Coming to the conclusion that debts have reached an unmanageable peak is devastating for the average Florida resident. Realizing that bankruptcy is necessary when that person is a veteran might be doubly so. Unlike certain benefits, veterans disability benefits are considered income in the means test, which can affect a veteran's ability to seek Chapter 7 bankruptcy protection.

Although both Chapter 7 and Chapter 13 bankruptcy are effective approaches to handling debt, some filers benefit more from the former. Chapter 13 sets individuals on a three to five year repayment plan before remaining unsecured debts are discharged, while Chapter 7 provides more immediate debt relief. However, those seeking this type of financial reboot must pass a means test. This test evaluates a person's average income against the state's average and also takes the filer's amount of debt into consideration.

Rapper Lil' Kim seeks Chapter 13 bankruptcy protection

Regardless of income, assets or career, virtually anyone can find themselves drowning under debt. For some people in Florida this may be difficult to believe, but whether its through the slow accumulation of smaller debts or a massive financial disaster, anyone can find themselves with more debt than they can repay. Popular rapper Lil' Kim recently made this point clear when she filed for Chapter 13 bankruptcy.

Born as Kimberly Jones, Lil' Kim filed for bankruptcy three days after her $2.3 million home was foreclosed on, stating that she was more than $664,400 behind on her mortgage. In her filing she also cited more than $4 million of debt that she cannot repay, which apparently includes the $1.5 million that the IRS claims she owes in back taxes. She also owes approximately $200,000 for unspecified legal fees.

Women with student loans may struggle with debt relief

Some people in Florida accumulate debt through unexpected bills, emergencies or even through careless financial planning. Others, however, find themselves saddled with debt from the pursuit of a better life. Student loans recently reached a new high, and some experts believe that women may be most in need of debt relief.

The Federal Reserve recently released data that showed student loan debt hit $1.5 trillion. This is higher than the nation's current $977 billion in credit card debt and $1.1 trillion in auto loans. Although some students owe significantly more or less, the average public college graduate owes approximately $28,400. In 2001, the average student graduated owing only $22,100. Neither of those figures include student loans taken out for for-profit colleges.

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