Credit Card Debt Relief in Houston, TX

Credit Card Debt Relief in Houston, TX

In its March 2015 report on Consumer Credit, the Board of Governors of the Federal Reserve System reports revolving consumer credit outstanding (essentially, credit cards) of $889,000,000,000.00.1 This is 889 billion dollars owed by American citizens, an average of about $7,300 per total U.S. household and an average of about $15,600 per household that has credit card debt. 

The convenience and security of using credit cards makes “plastic” a logical, normal way to pay bills on a day-to-day basis.  Like a steady diet of hamburgers and french fries in relation one’s physical health, one should ask if the convenience of plastic is worth the costs to one’s financial health. 

If you pay off all of your credit cards every month such that your monthly balance is paid down to zero every month, then the following should not be important to you.  If, however, you carry a monthly balance on any of your credit cards, you need to consider the rest of this article:

According to a report issued by the Consumer Financial Protection Bureau in December 2014, about 43 million Americans have delinquent medical debt on their credit reports.2 This is about 1 in 5 credit reports.  There is little doubt that unpaid medical bills are a major problem for Americans.  

There are legitimate conflicts for all parties.  The medical profession should be lauded for providing medical care to people who do not have cash available to pay in advance.  Every American should have access to needed medical care.  Medical practitioners, including doctors, nurses, technicians and the pharmaceutical industry need to earn fair compensation for their services. 

The problem for many consumers is basic:  what can I do if I simply do not have enough money to pay all bills?  The answer is not the same for everyone.  People who have similar incomes may have differing options based on family size, ongoing need for medical care and many other factors.  There are often moral concerns.  Many people do not believe it is right to fail to pay someone who has helped you.  Others may believe that they have been taken advantage of by overcharging or under-performance.   

As authorized by the United States Constitution, Congress has enacted bankruptcy laws that apply to citizens of the United States.1 

If a citizen is not able to pay all of the medical bills of the family, it is likely that other bills are also not being paid.  In such circumstances, it is important to talk to a qualified consumer bankruptcy attorney, to identify your rights under the bankruptcy laws established by Congress and to discuss available options.

While the amount of each pay check may be limited by applicable law, garnishments generally disrupt cash available to the garnishee (the person whose wages are garnished).

A Chapter 7 bankruptcy or a Chapter 13 reorganization may be effective to stop or limit garnishments. 

A dischargeable debt may be limited in a Chapter 7 proceeding.

Garnishment of a debt that is not subject to discharge may still be limited by a Chapter 13 reorganization.  By way of example, garnishment of a tax debt may be stopped and the debt or such portion as is owed may be paid through a multi-year reorganization.  As another example, child support arrears may be paid through a Chapter 13 reorganization while ongoing child support continues to be paid.

Sometimes there are not easy answers to garnishment problems. 

If you are subject to a wage garnishment or if you have received a notice of intent to levy from the IRS, you should talk to a qualified consumer bankruptcy attorney to determine your rights.

Recent data from the U.S. Department of Education indicates that approximately one-third of borrowers with student loans were more than five days late on a student loan.  Estimates indicate that six to seventeen percent of loans are more than thirty days late. 

Should the student loan lenders and loan servicers be worried about the delinquencies?    Not really.  Government-backed student loans continue to gather interest until paid.  Various federal laws assist the lenders to collect  student loans.  Student loans are generally not dischargeable in bankruptcy.

Section 523 (a) (8) of the Bankruptcy Code allows discharge of student loans in bankruptcy only upon a showing that the student loan imposes an undue hardship on the borrower.  While this would seem easy to demonstrate, the standard applied by the courts requires the debtor to demonstrate that:

  • Making payments on your student loan will not allow you and your dependents to maintain even a minimal standard of living,
  • That there is almost no chance that your financial situation will change, and
  • That you have made a good faith effort to repay the loan.

Student loans are easy to get for college, graduate school and many other forms of education. Examples include culinary arts, mechanics, carpentry, locksmith, drafting, cosmetology, truck driving and many other trades.  The main loan servicers that manage federal student loans are Navient Corp. (formerly Sallie Mae), Nelnet, Inc., Great Lakes Higher Education Corp. & Affiliates, and Pennsylvania Higher Education Assistance Agency aka FedLoan Servicing.

Taking on a student loan for a traditional college seems to be a step toward a brighter future.  College graduates may earn significantly more money than persons who do not attend college. See “The Economic Value of College Majors” published by Georgetown University’s McCourt School of Public Policy (https://cew.georgetown.edu/wp-content/uploads/Exec-Summary-web-B.pdf, Anthony P. Carenvale, Ban Cheah and Andrew R. Hanson, 2015).

On the other hand, for-profit colleges may not provide the expected step up the ladder to economic prosperity.  In “HomeRoom,” the official blog of the U.S. Department of Education, it is reported that for-profit colleges represent only about 13 % of the total higher education population, but account for about 31% of all student loans and about 50% of all student loan defaults.  See “Fact:  Too many career-training programs lead to low wages, high debt.” (https://cew.georgetown.edu/wp-content/uploads/Exec-Summary-web-B.pdf).

Should you or your family member be worried about taking on a student loan? 

Yes, you should be very cautions.  Because of government backing, student loans are deceptively easy to get.  Because of federal law and government policy, student loans continue to accrue interest until paid and adversely affect lives of the borrower and the borrower’s family.

Important Concepts:

Be cautious about taking on a student loan.   Be particularly cautious if the loan is to attend a for-profit college or career-training school.

Be cautious about guaranteeing a student loan for anyone else.

If you have a student loan, recognize that you will likely need to pay it.

If you have a student loan that you cannot pay:

  • seek help through the Department of Education for deferments and other programs, and 
  • talk to a qualified consumer bankruptcy attorney.

[1] See “Consumer Credit – G.19 Current Release,” Board of Governors of the Federal Reserve, March 2015, http://www.federalreserve.gov/releases/g19/current/.

[2] See “Consumer credit reports: A study of medical and non-medical collections”  Consumer Financial Protection Bureau, December 2014, http://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf

[3] “The Congress shall have the power . . . To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;” Art. 1, Sec. 8, United States Constitution.

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