Many Indiana residents are struggling with debts and trying to figure out how to not lose things like their cars and homes to repossession or foreclosure. This had led many to make bad financial decisions that end up doing more harm than good.
For example, many Indiana residents have no doubt heard of zero-balance credit card transfer offers. These zero-balance cards typically allow a person to transfer over a debt and not have to pay any interest on that debt for, in some cases, up to 18 months.
Some hear of a deal like this and decide to pay off their car with their zero-balance credit card. The idea being that as long as the car is paid off before the introductory zero interest rate periods is up, they will actually be saving money on interest charges.
The issue though is that while this may sound like a good idea in theory, in practice there are a number of red flags. The first being that if the car is not 100 percent paid off by the time the introductory zero interest periods is over, the interest charges will actually cost more than if the balance was never transferred.
On the flip side of this, if a person has enough money to be able to pay off the car on the credit card before the introductory rate is up, this person is most likely able to just write a check to pay off the car and never have to deal with transferring the balance and trading installment debt to revolving debt. Besides, changing debt from installment to revolving tends to negatively affect a person’s credit score.
In the end, the take home message is that while there are a lot of great theories floating around on how to take care of financial situations, it is important to talk with an experienced debt relief attorney before making any rash decisions.
In our last post we focused on the fact that younger Americans are really starting to rack up credit card debt. And while this is certainly true, Demos, a policy research organization, found that Americans over the age of 50 are also really financially struggling with credit card debt.
One 62-year-old woman recently shared her story. After helping her daughters with college, some unexpected medical bills and getting a divorce herself, and also deciding to go back to school, she finds herself paying hundreds of dollars per month in credit card debt. However, these payments are mainly going to interest and she isn’t really seeing the overall balance of what she owes going down.
The study conducted by Demos shows she is not alone. Of those over the age of 50 who are considered low-to-middle class, those with credit card debt owed an average of $8,278. When looking at where this debt is coming from, half rely on credit cards for medical expenses and half use their cards for every day expenses, like groceries and utility bills.
In terms of paying down this debt, many have found it even harder in recent years. Due to the recession, after being laid off, many hard workers were not able to find jobs.
Fortunately, just like anyone else who is struggling with credit card there, there are often debt relief options that are available. These options can result in peace of mind, especially for those who are getting closer and closer to the retirement age.
Many Indiana residents know how credit card debt is. Either accrued over time due to poor budgeting, or relying on a credit card for necessary purchases, having credit card debt can be frustrating and frightening as many borrowers simply do not have the finances to pay back all that is owed.
Having credit card debt is certainly not limited to a specific demographic either. Rather, men and women and people of all ages are finding themselves in baffling financial situations.
According to one recent study, credit card debt among the younger generation seems to only be increasing. In fact, according to the university study, those born between the years 1980 and 1984 have, on average, $5,689 more in credit card debt than their parents did. Compared to their grandparents, younger Americans today have on average $8,156 more in credit card debt.
When looking at what is happening to rack up this debt, there are several factors all playing a role.
One is temptation. Many college students are inundated with credit card offers. For some, the temptation becomes too great. They cave-in and sign up for a credit card. A purchase here and a purchase there suddenly starts to add up, and before even realizing what is happening, these students end up racking up several thousands of dollars worth of debt.
Of course, with the current economy, one also has to wonder if recently graduated college students are finding themselves in the tough position of not being able to find a job after graduation. In those cases, there is no doubt that many start to rely on their credit card. This reliance can rapidly spiral out of control too.
When it comes to accrued debt, regardless of a person’s age, those with credit card debt should know that there are often debt relief solutions available. An attorney with experience handling debt relief can walk a person through those options.
You are over 62 years old, own a home and are struggling to pay the bills. An advertisement comes on TV that tells you that you can turn your home’s equity into “tax-free cash.” You learn that by signing up for a reverse mortgage, you will be able to stay in your home until you pass away — as long as you qualify.
It sounds like a promising option, but like anything promising, there are drawbacks.
Why would mortgage companies offer reverse mortgages? First, they bring in money. By only offering reverse mortgages to individuals over 62 years of age, they can expect a good return on many of their investments. Furthermore, they allow banks to immediately foreclose on a home after a death.
Yet, even though consumers must go through counseling before receiving a reverse mortgage, many do not understand the full implications. “It is not free money,” the government is now warning consumers.
Instead, the assistant director of the Consumer Financial Protection Bureau’s Office of Older Americans, Hubert H. Humphrey III states, “[Your home] is your nest egg. This is what you use when you don’t have any resources.” Unfortunately, people often decide to take the money out at age 62 and find that, years later, they need it and it is no longer there.
Take, for example, the story of a woman who was younger than 62 when she and her husband (who was over 62) applied for a reverse mortgage. Since she was under the required age limit, she was unable to sign the mortgage. When her husband passed away, the bank immediately foreclosed on the home, leaving her with very little, the money from the reverse mortgage already spent.
So, if not a reverse mortgage, then what? If you suffer from overwhelming debt, filing for bankruptcy may be an option for you. Most homeowners are afraid to file for bankruptcy because they believe they will lose their home and other possessions. Yet, in most cases, debtors are able to keep their homes during and after bankruptcy. This is because certain property is exempt from liquidation under state and federal bankruptcy laws.
If you are a senior facing significant debt, consider all of your options before deciding on a reverse mortgage. As Humphrey points out, a reverse mortgage should be considered as a last, and certainly not a first, option.
Learn more about debt relief options by visiting our pages on debt relief in Indianapolis.
The Great Recession and housing market crash brought with it unprecedented numbers in terms of foreclosures. Not only did the housing crash effect homeowners who really wanted to continue living in their homes, but it also had an impact on neighborhoods as homes now sit vacant.
Part of the issue with these now vacant homes, is not only are these homes susceptible to crime and property damage, but there are plenty of cases where the homeowner still technically owns the property and now owes back property taxes and other fees.
These types of homes have been labeled as “zombie” foreclosures. This is when a homeowner received notice of the foreclosure and moved out, only to find out years later that they still legally owned the home.
According to RealtyTrac, in the past three months there have been roughly 302,000 homes in the U.S. that fall under the category of “zombie” foreclosure. Indiana is one of the states with a high number of these types of properties.
In looking at how this even became a problem, one must look back to 2008 when the housing market crashed and banks were having a hard time re-selling properties. In order to save money on costs associated with foreclosures, the banks would just not officially foreclose on the home. While good for the banks, for the homeowners it has become disastrous. Not only is their credit score now affected by the foreclosure, but the unpaid property tax debt only further drives down their credit score.
For those in Indiana who are either facing foreclosure now, or who are living in fear of a foreclosure, as the “zombie” foreclosure issues goes to show, it is important to talk with an attorney when figuring out what next steps need to be taken. Maybe filing for bankruptcy is the best option in order to just avoid the foreclosure process altogether? Or, maybe getting rid of a second mortgage is the best choice? Either way, an attorney can walk through these scenarios with a struggling Indiana homeowner.
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