New Jersey residents approaching retirement may wonder when they will be able to retire in light of debt that remains unpaid. Credit card debt and student loans weigh in as two debts that some older individuals may still need to pay off. Some baby boomers may benefit from mapping out their finances before retirement.

Today older Americans owe nearly $43 billion in unpaid student loans for themselves or their children. In 2005, this amount was $8 billion. One plan for reducing student loan debt is to increase the time to pay off the loan. Another is to check into other ways to reduce the debt. It may be advisable to encourage children to borrow for their own education. Helping them and becoming dependent on them later on may not be a good idea for parents or children.

Fewer boomers have finished paying off their mortgages than in previous years. It may be comforting to do so, but getting a tax break with interest deduction on the mortgage helps. It may seem a good idea to pay down the mortgage, but withdrawing money from a retirement account may end up costing more in penalties. Downsizing may be a wise choice or renting without the burden of a mortgage.

Boomers, on average, have high credit card debt. Saving the card for an emergency may be a good idea, but using it too frequently may hinder retirement. Using cash to shop may show where the money is going and highlight ways to save.

The decision to delay retirement may be based on how much debt a boomer has. If credit card debt is too high, an attorney may be able to offer insight into ways a debtor might pay it off or discuss options for relief, such as bankruptcy.

Source: FOX Business, “Boomer Retirees Need a Hand Paying Down Debt“, Casey Dowd, October 09, 2014

New Jersey consumers carry an average debt of more than $62,000 each, an amount that is about $15,000 higher than the national average. Their per capita credit card debt is the second highest in the nation.

With such high levels of consumer debt, it is no wonder that many people need to find ways to reduce their credit card payments and balances in order to find relief. There are several methods for reducing credit card debts which people can consider. First, if possible, the best way for people to improve their financial situations is to pay off all of their credit card debt in one payment. Not every credit card holder is able to do this, of course. A second approach is attacking the credit card debt from the top down. In this method, people pay off the credit card with the highest interest rate, then moving to the next-highest and so on until all are paid in full.

Of course, simply making certain to pay on time each month will avoid accruing late fees. For people who are responsible enough, paying off credit cards with a home equity loan may be a good option, as those loans often have interest rates much lower than credit cards. Finally, some people are able to transfer credit card debt from higher interest cards to lower interest ones.

No matter what consumers choose to do, paying off credit card debt is an important step towards financial freedom. If the consumer debt amounts are simply insurmountable, debtors may wish to consider bankruptcy in order to obtain relief from credit cards and other types of debt.Source: Debt.org, “Consumer debt in New Jersey“, Bill Fay.

Source: MainStreet, “5 Tips to Cutting Your Credit Card Bills as Consumer Debt Jumps“, Brian O’Connell, October 03, 2014

Residents in New Jersey who owes credit card debt could be interested in the answers to questions posed by a consumer who was being pursued by a credit card issuer’s collection agency recently. The debtor wanted to know whether consumers have the right to demand proof of the debt from them and what they can do if the collection agency refuses. According to Fair Debt Collection Practices Act, a debtor has every right to request a verification of debt. However, that request must be in writing within 30 days of receipt of the notice from the collector.

In addition, the collector is legally obligated to stop all collection activity against the requesting debtor until it has provided that VOD, according to a National Consumer Law Center attorney. On the other hand, if the initial notice from the collector was more than 30 days prior to the filing, then the creditor could simply ignore the request, continuing to harass the debtor. If that occurs, the debtor has the option to request in writing that they cease contact regarding that account.

At that time, there are two options available to the collector. One option is dropping the claim altogether, and the other is filing a lawsuit. If they do file suit, prevail in court and get a judgment, then they will have the right to garnish the debtor’s wages and seize assets. However, in order for collectors to get judgments, they have to have a proof of debt to show the court.

Negotiating with a collector could be the best way to avoid a judgment, and the next best way is by showing up in court. For help with negotiations or preparing a viable case to present in court, a bankruptcy law attorney who regularly handles credit card debt cases could be an effective asset for a consumer’s possible debt relief.

Source: FOX Business, “Can I Request Proof of Credit Card Debt?“, Jeanine Skowronski, August 20, 2014

New Jersey residents may know that credit card debt may be difficult to pay off. This might result in a long-lasting debt that never seems to go away. Yet, paying off the bill slowly may make the difference between seeing the original amount double or even triple.

A $50,000 credit card debt with 24 percent interest rate may take 42 years to pay. This might happen if the credit card holder only pays the minimum amount due each month. In this case, the final amount paid for charges totaling $50,000 would be $99,363.04. In the beginning, the principal amount, $50,000, is large, and the minimum payments are high, averaging about $1,500 per month. As the principal goes down, the minimum payments decrease. With smaller payments, catching up on the debt takes longer.

One way to pay off credit card debt is to pay the same payment every month. Using this example, paying $1,500 per month on a $50,000 principal will take less than 60 months to pay. The final payout will be $83,220.87.

One way to avoid high credit card debt is to try to save as much as possible. Ideally, having six months worth of expenses in case a financial downturn occurs may make it possible to use a credit card less.

Some individuals, particularly when the economy is bad, find it difficult to pay off credit card debt. Losing a job, or being unable to work due to illness, are both reasons this may happen. Even a minimum payment is too much, and a credit card account may be placed in collections. Consulting an attorney to see what options are available might be beneficial. The attorney may offer insight into choosing bankruptcy to eliminate most consumer debt.

Source: FOX Business, “Fastest Way to Pay Down $50K Credit Card Debt“, Steve Bucci, July 31, 2014

Debt is increasingly a part of life, in New Jersey and across the U.S., and so it is increasingly a part of death too. When a person dies, his or her estate is obliged to pay liabilities, including taxes and debts, before making distributions to heirs. Debts typically do not die with the debtor, therefore, and they usually must be paid. On the other hand, debts normally will not pass to heirs. If the decedent has a will, it will usually name an executor to manage the estate, handling distributions to creditors and heirs. In the absence of a will, a probate court may appoint an administrator to step in and perform the actions of the executor.

If the estate’s assets are sufficient to cover the decedent’s liabilities, then the heirs will inherit the remainder. The executor or administrator of the estate may in some cases be able to settle the debts of the estate for less than the amount owed, leaving more assets for distribution. If the estate is insufficient, though, some debts may pass to heirs. In community property states, for example, a surviving spouse may still remain liable for those debts.

Generally, creditors are forced to write off debts after the debtor dies. Joint account holders and co-signers remain liable for debts to the extent that they were liable before the person died. An authorized user of a credit card will typically not be liable for the debt.

Creditors have the legal right to call once to determine who is administering the estate of the decedent. Repeated calls to collect debts, especially debts of another person, may constitute creditor harassment. A bankruptcy attorney may be able to help those who are struggling with credit card debt to understand the rights and obligations they have regarding repayment or to eliminate or reduce the amount outstanding.

Source: Motley Fool, “What Happens to Credit Card Debt When Someone Dies“, Peter Andrew, July 19, 2014

If an outstanding balance is small enough, a creditor may not put much effort into tracking the individual who owes it down, but the organization may still end up reporting the debt to a credit agency. Unless someone is regularly tracking their credit score, these types of small debts may end up going unnoticed and unpaid until the individual applies for a car or home loan. While most people stay on top of credit card debt, unpaid lab bills from a doctor’s visit or late fees from movie rentals may not be on someone’s radar.

In spite of a low dollar amount owed, small unpaid balances can have a substantial impact on someone’s credit rating because credit ratings are determined in part based on whether bills were paid on time and whether they went to collections. The simple act of a $20 past due account going to collections can have a detrimental effect on a credit rating, and the drop in a score can lead to problems getting the a loan with the lowest interest rate possible.

In an effort to help reduce the impact of small debts, the most recent FICO version does not count past-due obligations that are less than $100, but not all lenders are required to follow these standards. People should regularly check their credit scores, using free reports that are available online, and dispute any contested charges as quickly as possible to prevent damage.

If someone finds themselves unable to keep up with bills, it can have a continuous negative effect on their credit rating. Filing for bankruptcy may help people regain control of their finances and in time rebuild their credit score. A bankruptcy attorney can provide information about the process.

Source: FOX Business, “Small Debts Can Lead to Big Credit Score Problems“, Erica Sandberg, July 17, 2014

When a New Jersey resident cannot repay a credit card debt, could a creditor garnish funds from that person’s Individual Retirement Account? The answer to that question depends on whether or not the individual in question is actively withdrawing the funds. If funds from an IRA have been withdrawn and placed into the owner’s savings or checking account, the money could be garnished if the creditor wins a judgement to seize a bank account. However, funds in IRAs and other retirement accounts are generally beyond the reach of creditors.

When a creditor attempts to seize money in a bank account, it can only take what is available in the account at that time. For example, if there were $1,000 in the account, a creditor would only be able to take that $1,000. In the event that the balance in a bank account is less than the amount owed, a creditor may get additional judgments until the debt is paid off.

To lower the odds of having money in any type of account seized, it may be a good idea to contact a creditor as soon as possible. Creditors are sometimes willing to work out a payment plan because compromising on an outstanding balance is often less expensive than taking legal action against a debtor.

Paying off a credit card debt can be difficult for those who have limited savings or are on a fixed income. Someone who is in need of debt relief may wish to hire legal counsel to help find ways to either negotiate a lower payment or have the debt forgiven or otherwise discharged. Hiring an attorney may also force creditors to stop contacting the debtor and instead contact the attorney about the debt in question.

Source: Fox Business, “Can Credit Card Company Garnish IRA?“, Jeanine Skowronski, July 10, 2014

New Jersey residents may be interested in hearing the results of several new studies on the amount of credit card debt people carry. According to a survey conducted by one financial services website, the average American household carries around $7,000 in credit card debt. However, for people who consistently have a balance on their credit card, the average amount is $15,000. This study analyzed statistics compiled by the government.

A study carried out by another company found slightly different results, concluding that the average credit card debt is closer to $11,000. Meanwhile, a third study found that American households have an average of around $7,000 of indebtedness. The statistics differ because not all people who have credit carries carry a balance. Others may pay the balance off every month.

Most credit cards carry high interest rates. Those who want to eliminate balances on multiple cards may try to work on paying off the card with the highest interest rate first while still paying the minimum amount on the others. Another approach is to try to pay off the card with the lowest balance first and leave the card with the highest balance for last.

Consumers who have more credit card debt than they are capable of paying may consider filing for bankruptcy. Filing for Chapter 7 bankruptcy can help a person eliminate credit card debt through a discharge of most unsecured indebtedness. This form of bankruptcy is ideal for people who own little property and do not make much more than they spend on living expenses. For people who own a significant amount of property, Chapter 13 bankruptcy may be a better option. It provides for a consolidation of obligations into a manageable payment program over a period of three to five years.

Source: Daily Finance, “Is Your Credit Card Debt Average? And What’s Average?“, Michele Lerner, June 11, 2014

While credit cards can be a great financial tool for New Jersey residents when used properly, there can be side effects to using them. The biggest side effect to using a credit card is the inflationary side effect. Although the rate of inflation has been 2 percent over the past few years, items that are charged on a credit card have the equivalent of 13 percent inflation. That is a level that hasn’t been seen since the 1970s.

This can lead to a general fear about the future, as a borrower is going to dread getting a credit card statement because he or she doesn’t necessarily know how to make the payments. Instead of being able to contribute to a retirement or savings account, more money will be spent on credit card debt and that can have a drag on household spending.

Finally, credit cards can have a huge impact on a person’s career. In some cases, switching careers can be a temporary setback on the way to greater career success. However, those who have credit card debt to pay have no room for such movement. A demotion or a long period of unemployment could be even more devastating to those who may not have the money needed to keep up with that debt anymore.

Those who are battling credit card debt may wish to speak to a bankruptcy attorney or to a credit counselor about their options to pay off that debt. While bankruptcy may seem like an option worth pursuing, debt consolidation or a debt settlement plan may also be viable options for anyone seeking debt relief. Regardless of what a debtor chooses to do, talking to a professional may make it easier to negotiate new payment terms with creditors or possibly stop creditor harassment.

Source: FOX Business, “The Side Effects of Credit Cards“, Richard Barrington, June 05, 2014

It is undeniable that having a college or advanced degree brings many advantages and opportunities, not the least of which is the promise of higher overall earning potential. But in an economy with an extremely tight job market and an ever-growing gap between the degree haves and have-nots, those who had to borrow large amounts of money to obtain those degrees are facing more and more financial challenges.

One of those challenges, according to a recent report by the Pew Research Center, is that those with higher levels of education debt tend to have a lower net worth and higher amounts of other types of debt, including credit card debt, than those who did not borrow significant sums for school. The report looked at households with college-educated adults under the age of 40. Those with no college debt had an average net worth of $64,700 and median total indebtedness of $73,250. Those households with college debt had an average net worth of only $8,700 and overall indebtedness of over $137,000. These comparisons are startling.

Currently, the average college graduate leaves school with slightly less than $30,000 in student loan debt, and many students are even exceeding $100,000 to get their degrees. There is no doubt that graduates are struggling to repay these loans after they leave school, and economists say that their struggle is a drain on the economy because it is preventing them from investing and making large consumer purchases such as homes and cars.

Even though student loans are generally not dischargeable in bankruptcy, those in New Jersey who are struggling with high student loans and other types of debt might want to consider consulting a bankruptcy attorney to determine whether some relief may be obtained by addressing credit card debt, medical debt and other types of debt that are dischargeable.

Source: New Jersey Herald, “Graduates face long road of loan repayment,” David Wenner, May 24, 2014