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Are you in danger of a wage garnishment?

Falling behind on your bills can be scary. Nearly everyone has a period of time where things get tight, and some obligations have to be set aside until matters are settled. This seems to be occurring more often lately as medical costs climb and jobs are less reliable.

No matter the reason for your financial struggles, you may be feeling a little anxious. As long as your paychecks keep coming, you may be feeling hopeful. Howevere, creditors can garnish your wages when you fall behind on your payments.

Holiday spending habits don't go away easily

Florida shoppers will likely turn to their credit cards to buy goods this holiday season. In 2016, the average U.S. shopper spent $657 on gifts and other purchases, and that number is expected to go up slightly to $660 in 2017. This was according to the Consumer Holiday Shopping Report from NerdWallet. The report also found that 24 percent of people went over their budgets last year despite taking time to make one.

Putting Christmas gifts and related spending on a credit card could cost more in the long run because of interest charges. Carrying balances on a credit card could also hurt a person's credit score. Ideally, debtors will aim to use no more than 30 percent of an available credit limit. To keep spending to a reasonable level, individuals are urged to make a realistic budget and to avoid being swayed by deals from retailers.

How bankruptcy may help a debtor

Florida residents who are struggling with their financial obligations may benefit from filing for bankruptcy. However, it is a decision that shouldn't be made lightly. It is important to know that it can stay on a credit report for up to 10 years. This may make it more difficult to get a job or obtain housing. It may also make it harder to get the best rates on an insurance policy.

Prior to actually filing, it may be worthwhile to talk with an attorney and a credit counselor. Doing so provides a debtor with objective viewpoints as to whether bankruptcy is the right option. Credit counselors may suggest alternatives to bankruptcy while an attorney may also offer advice that can help a debtor manage his or her debt. The final step is to determine what type of bankruptcy to file for.

The impact of debt consolidation on credit

Florida residents who are thinking about ways to regain control of their finances may want to consider debt consolidation. Depending on how the debt is consolidated, it may act to reduce interest paid on a balance without ruining a person's credit. For instance, taking out a new loan to pay off current debt may actually improve a credit score in the long run. This is because the new loan may reduce the amount of credit a person is using.

Those who have poor credit may want to look into a debt management plan, or DMP. While debt balances aren't consolidated, a debtor generally makes only one payment per month to the agency that offers the plan. From there, the money is distributed to creditors. If a debtor has good credit, a DMP may harm their credit scores, and debtors are not allowed to use credit cards while participating in one.

Watch out for circumstances that can lead to foreclosure

In the blink of an eye, your life can change. This often leads to some type of financial impact as well. If you are a homeowner in Florida, the smallest dip in income -- even if it is temporary -- can set you back.

If life often throws you a curve ball due to an unexpected crisis or a situation that develops over time, you may come upon tough financial times. Fortunately, with a little guidance and foresight, you may be able to avert worst-case scenarios, such as threat of foreclosure on your home.

401k contributions deductible court finds

Florida residents may be able to deduct contributions to a 401k plan even if they hadn't contributed in the six months before filing for bankruptcy. That is what a judge in Illinois ruled in Oct. 2017. As long as there was no intent to show bad faith, the retirement contributions can be counted as an expense when calculating disposable income.

When filing for Chapter 13 bankruptcy, a debtor must use disposable income to pay creditors according to a set payment plan. The plan lasts for three or five years using regular income to repay debt balances owed. In this case, a couple wanted to deduct $200 a month to put into their 401k. Although the trustee in the case objected, the trustee also acknowledged that the deduction would be allowed had similar ones been made in the prior six months.

Consumer credit increases in September

In September 2017, consumer credit rose by $20.8 billion, which would be a rise of 6.6 percent annualized. Specifically, revolving credit rose $6.4 billion while other types of debts rose $14.4 billion. The growth in non-revolving credit was attributed in part to increased level of auto purchases after massive hurricanes hit Florida and Texas. In the third quarter, auto loans rose by $19.3 billion.

Before seasonal adjustment, lending by the government increased by $35.2 billion in the third quarter. The majority of this lending was in the form of student loans, and there is no data regarding lending related to debt secured by real estate in the consumer credit report. Overall, consumer credit grew by 5.5 percent in the third quarter. While home and stock prices are going up, it is believed that those without such assets may struggle as prices rise.

Putting phantom debt to rest

Many people living in Florida have to deal with bill collectors. In some cases, the collectors try to collect a legitimate debt in an ethical manner. In other cases, however, the person being contacted has already paid or never owed the debt in the first place. In these situations, the collection efforts are often the result of bookkeeping errors or mistaken identity. However, creditor harassment sometimes persists.

The problem of what is called "zombie" or "phantom" debt is often the result of a practice known as debt buying. Original creditors who no longer want to be burdened with attempting to collect money owed may sell a debt directly to a collection agency for a fraction of its value. The collection agency then attempts to collect the full amount of the debt. If that collection agency fails, it may resell the debt to yet another agency.

How to overcome yo-yo debt

Those who pay off their credit cards just to max them out again are referred to as yo-yo debtors. While anyone in Florida can be guilty of this habit, it may be more common among younger people who may not necessarily understand how credit cards work. In some cases, this may be a result of spending money without thinking about the impact.

This has played a role in 43 percent of millennials having sub-prime credit. Individuals may be able to get a handle on their debt by making a monthly budget, paying more than the minimum payment amount and understanding their credit limits. Working with a credit counselor may help an individual of any age learn more about credit and how to use it responsibly. By getting a handle on her credit, one woman was able to raise her credit score 200 points.

Debt management plans

Many people in Florida and around the country struggle with their bills. While they do their best to get caught up, they are not always able to do so. These individuals often experience a great deal of stress, creditor harassment and, in some cases, may even be taken to court by creditors.

One option for some of these debtors is entering into a debt management plan (DMP). This is a debt relief option that is sometimes offered as part of credit counseling. A credit counselor reviews a client's current income, debts and expenses and determines whether a DMP is a feasible option.

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