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Brownsville Texas Bankruptcy Legal Blog

Carrying credit card debt likely not helpful for credit scores

According to a new report, 22 percent of credit card users carry a balance in hopes of improving their credit score. However,  carrying a balance on a credit card is not one of the five main criteria for a credit score. Being closer to a credit limit due to credit card debt, however, can have a negative impact for individuals in Texas and across the country.

Carrying a balance on a credit card can have many unintended consequences for those using the balance to improve their score. For example, people can be hit with high interest as a result of their credit card balance. The average American carries a credit card balance of $6,375. Even if this did boost a credit score, the cost of the interest would outweigh any such benefit.

Putting off Chapter 7 bankruptcy can have serious consequences

The decision to file for bankruptcy is a serious one that people rightfully do not take lightly. While careful consideration is a good idea, procrastinating on filing for Chapter 7 bankruptcy can be a bad decision. There are a few reasons that Texas individuals who know they need to file should consider doing it sooner rather than later.

Experts often refer to the period before filing for personal bankruptcy as the "financial sweatbox." During this period, people's assets, such as their car, may depreciate while lenders may file lawsuits to collect. It is not unusual for individuals to face difficulty getting basic necessities during this period, like affording food and keeping a roof over their head.

Two basic types of Texas probate

Probate, the administration of an estate following an individual’s death, is handled differently in Texas than most of the rest of the country. The state has two kinds of formal probate. One is a procedure, called independent administration. The other is a court-supervised process, called dependent administration.

Why medical debt is a leading cause of bankruptcy

In 2016 alone, the United States saw 770,946 personal bankruptcy filings. Although there are many reasons a person may file for bankruptcy, medical debt continues to be a leading cause of this debt relief option in Texas and across the country. Contrary to popular belief, those who are insured may also experience high levels of this type of debt.

In the United States, the average hospital stay costs $10,700. Costs can vary but are still typically thousands of dollars; a routine childbirth runs about $3,600 while a heart attack stay can cost over $20,000. Even those with insurance typically have out-of-pocket costs for these stays, which can result in medical debt should an unexpected medical issue occur.

The difference between Chapter 7 and Chapter 13 bankruptcy

Many people considering filing for bankruptcy are unfamiliar with the multiple "types" available for personal filers. More people filing for personal bankruptcy in Texas will fall into the category of Chapter 7 or Chapter 13 bankruptcy. It is a good idea for individuals thoroughly understand both types to pick the right option for their particular situation. 

The main difference between Chapter 7 and Chapter 13 bankruptcy is whether debts are completely dischargeable. In Chapter 7, a debtor can eliminate all unsecured debt, whereas payments can still be made with Chapter 13. Understandably, someone will need to be in a more dire situation and prove that he or she will not be able to earn enough to keep up with debts for Chapter 7 to be an option.

How to get a personal loan after filing for Chapter 7 bankruptcy

One of the most well-known consequences of filing for bankruptcy is the mark on a credit report. Texas individuals may worry about access to credit following a bankruptcy filing, as a lower credit score can impact the ability to qualify for a loan. However, while getting a personal loan may be more challenging following Chapter 13 or Chapter 7 bankruptcy, it is not impossible.

While a bankruptcy filing can lower a credit score from 130 to 240 points, there is an upside. Chapter 13 and Chapter 7 bankruptcy will also lower a person's debt-to-income ratio, which can boost a credit score over the long-term. It also offers a fresh start financially for those who are struggling with debt, and those who manage finances properly after filing may see an uptick in their credit score in a matter of years.

What is the best card to pay off when facing credit card debt?

Those holding debt in many different places often struggle with deciding who to pay off first. This is especially true when facing credit card debt from multiple Texas credit card companies, juggling the many balances owing with factors like interest rate. On top of this, people need to understand what they can afford to pay off without struggling to make ends meet in life.

It is important not to focus too much on paying off credit card debt when there are other factors to consider. For example, everyone should make sure they have an emergency fund available should something unexpected happen, like a medical emergency or lost job. Not saving this money could have dire consequences and force even more debt than before.

Only 4 of 10 adults have an estate plan

It's a fallacy that creating a will is difficult, complicated and overwhelming, but many people don't seem to want to address this issue because it also touches upon their mortality. Many think they will live forever, or put off estate planning for another day because they say, "There's always tomorrow."

Americans don't seem to understand the importance of having an estate plan. We have to spread the word that if you don't make these decisions at all, then the state will perform the task of distributing your assets; choosing an executor of your estate; naming a guardian for your children; and determining who will manage your children's financial affairs.

Improving a credit report after Chapter 7 bankruptcy is possible

One of the most difficult outcomes of filing for personal bankruptcy is the impact on one's credit report. People in Texas who file for Chapter 7 bankruptcy may wonder what their next steps should be to rebuild credit and regain control of their financial lives. Luckily, there are some steps that can be taken to rebuild one's financial profile after bankruptcy.

Chapter 7 bankruptcy is one of the two most common types of personal bankruptcy. The other type is Chapter 13. With Chapter 7 bankruptcy, there is no repayment plan and all assets are liquidated. The proceeds of this asset sale is used to cover debts.

What to do when credit card debt is in collections

When debts are not repaid, people run the risk of their accounts being sent to collections. Many people in Texas who are getting collections calls due to credit card debt or other outstanding balances may wonder about the best course of action when facing these bills. While bankruptcy may be needed in some cases, there are some things that can be done to manage debt prior to taking that step.

It's a good idea to carefully review all outstanding amounts and ensure there are no errors on the part of the lender. This should be done regularly, even if the consumer is not facing a great deal of credit card debt. However, scrutiny is particularly important when facing large debt loads. Once it is clear that all charges are fair and legitimate, work to figure out a long-term repayment plan that makes sense within a household budget.

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Limon Law Office
890 W Price Rd
Brownsville, TX 78520

Phone: 956-465-2661
Fax: 956-544-4949
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