Category: Articles

Debt’s Impact on Your Mental Health

In today’s fast-paced and consumer-driven society, debt has become an all-too-common reality for millions of people worldwide. While the financial consequences of debt are well-documented, its impact on mental health often remains overlooked or underestimated. The stress, anxiety, and depression that stem from financial burdens can create a vicious cycle that affects individuals and their families. Here, we will explore the intricate relationship between debt and mental health, shedding light on the hidden toll it takes on individuals’ well-being.

The Debt-Mental Health Connection

Debt, whether stemming from student loans, credit cards, mortgages, or personal loans, can be a significant source of stress for individuals at any income level. Constantly worrying about repaying loans, high-interest rates, and the fear of defaulting can be overwhelming, leading to a range of mental health issues.

Stress and Anxiety

Debt-related stress is a pervasive issue that can trigger anxiety and panic attacks in affected individuals. The uncertainty and pressure of meeting financial obligations can lead to sleep disturbances, a loss of appetite, and difficulty concentrating, resulting in reduced productivity and impaired overall functioning.

Depression

The weight of debt can lead to feelings of hopelessness and despair, fueling the development or worsening of depression. The persistent sense of being trapped in a financial rut can make it challenging for individuals to envision a brighter future, leading to a sense of helplessness and isolation.

Reduced Self-Esteem

Debt can significantly impact self-esteem and self-worth. When people are unable to manage their finances effectively, they may perceive themselves as failures, leading to a negative self-image and feelings of inadequacy.

Social Isolation

Debt-related shame and embarrassment often lead individuals to withdraw from social interactions. They may avoid friends and family gatherings, fearing judgment or uncomfortable discussions about their financial situation. This isolation can further exacerbate feelings of loneliness and depression.

Breaking the Silence

Unfortunately, societal stigmas surrounding debt and mental health often prevent individuals from seeking help. Many people feel ashamed or embarrassed about their financial struggles and avoid reaching out to friends, family, or professionals. This reluctance can perpetuate the negative impacts on mental health, making it crucial to break the silence and foster a more open conversation about debt and its emotional toll.

Overcoming the Debt-Mental Health Struggle

Seek Professional Support

If you or someone you know is grappling with debt-induced mental health challenges, seeking professional help is essential. Financial advisors can offer guidance on debt management and budgeting, while mental health professionals can provide valuable coping strategies and emotional support. If possible, try to utilize free financial resources to help your dilemma.

Practice Self-Care

Taking care of oneself is crucial when navigating financial difficulties. Engaging in regular physical exercise, maintaining a healthy diet, and practicing relaxation techniques like meditation can alleviate stress and anxiety, promoting overall well-being.

Develop a Repayment Plan

Working towards a structured repayment plan can provide a sense of control and direction. Prioritize high-interest debts and explore options such as debt consolidation or refinancing to ease the burden and reduce interest rates.

Engage in Support Groups

Joining support groups or seeking community resources can be empowering. Connecting with others facing similar challenges can alleviate feelings of isolation and offer practical advice and emotional understanding.

Conclusion

Debt’s impact on mental health should not be underestimated. The financial struggles faced by individuals can lead to stress, anxiety, depression, and a decline in overall well-being. By breaking the silence surrounding this issue and seeking professional support, individuals can find the tools and resources to overcome the mental health challenges associated with debt. Additionally, as a society, we must work to destigmatize debt-related discussions and foster a more compassionate and understanding environment, encouraging individuals to seek help without fear of judgment. Through collective efforts, we can mitigate the toll of debt on mental health and promote a healthier financial and emotional landscape for all. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose debts have become too much to handle.

If you need help with debt, contact us for a free consultation.

August 1, 2023
How to Manage Money as a Couple
Managing money on your own can be a challenge. Managing money as a couple, on the other hand, can help the process if done efficiently. However, getting it right takes strategy, especially since money is a major stressor in life. In fact, according to multiple surveys, about 40% of couples fight about money. Here are some tips on how to successfully manage money as a couple.

Always be transparent

When it comes to sharing money, transparency is key, and this begins long before saying “I do.” Before combining accounts and responsibilities, be sure to discuss your financial positions. Start a consistent dialogue so you are both always in the know. Ask questions like:
- How much money do you earn before after taxes?
- What budgeting style do you prefer?
- How much savings do you have?
- How much debt do you have?
- Do you prioritize paying off debt over saving?
Remember, starting these questions before getting married, keeping a nonjudgmental approach, and continuing the conversation after the wedding will give you the best chance at successful management of money.

Find a system that works for you

There’s no one size fits all system when it comes to managing money for couples. Some couples prefer to combine their accounts and debt, while others prefer to keep things separate. However, remember that any debt you take out jointly will be shared and both your responsibilities. In addition, in some states you will be liable for debt your partner borrows on their own, even if you are unaware of it. If you’re focusing on debt repayment, find the strategy that works best for your preferences. This could mean tackling the smallest balance first, or the largest. The most important thing to remember is that there is no right way of doing things. What truly matters is that you find a system that works for both of you.

Calculate your combined assets and liabilities

Assets are things you own that have an economic value. Real estate, cash accounts, savings accounts, jewelry, and stocks are some examples of assets. Liabilities, on the other hand, are debts you owe. Credit card debt, mortgage debt, student loans, and even a loan from a friend can be liabilities. Always knowing your assets and liabilities will give you a good understanding of what you have and what you owe. Having this knowledge can help you make realistic financial goals. For example, if your debt far exceeds your assets, you probably won’t make plans to go home-shopping or go on a vacation.

Discuss your financial goals

You should try to always have some sort of financial goal you’re working towards. This could be saving for a house, paying off a credit card, or working to increase your credit score. Whatever your goals are, discuss them with your partner regularly to ensure that you are on track to meet those goals. If you aren’t on track, discuss what changes you can make to fix that. You may find that these conversations help motivate both you and your partner to achieve your financial dreams.

Know when to ask for help

Sometimes, money and debt can become too much to manage and that’s okay. Before the situation worsens, consider asking for help. You could seek advice from a financial planner, and if the situation is weighing heavily on you, consider seeking help from a debt consultant. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose debts have become too much to handle.

If you need help with debt, contact us for a free consultation.
July 14, 2023
Good Debt vs. Bad Debt

It’s not news to many that having debt is a near necessity in the United States. Taking on debt can help build wealth in many instances. But how does one distinguish between good debt and bad debt? What are the key differences between the two? How can you use each of them to your advantage? Put simply, good debt can help you achieve your financial hopes and dreams, and bad debt can do the exact opposite.

What is good debt?

Good debt is essentially any type of debt that can potentially help increase your net worth or provide income. More importantly, it should come with a low interest rate or APR. These debts are viewed as good financial investments.

Education and Student Loans

Because education can enhance your future and potentially result in higher earnings, it is often viewed as a good investment. That said, student loan debt may be considered good debt to many, especially since most offer lower interest rates. While this is the general idea, you should always be practical about the amount you borrow for school. For example, it is better to borrow only an amount that you can realistically pay off with your projected salary. Most experts will agree that your student loan payment should not exceed 10% of your projected net monthly income.

Mortgages

While it will likely be the largest debt account you have, a mortgage can be your most valuable asset. This is true whether you purchase a home to live in, flip for a profit, or rent out for income. That said, a mortgage can help increase your net worth, but knowing how much you can afford is critical. Most modern-day experts will agree that your mortgage payment shouldn’t exceed 28% of your gross monthly income. In addition, your mortgage should not be more than 36% of your total debts, including credit cards, auto loans, and other debts.

Business Loans

Starting a business comes with a lot of risks. If you can manage to start a business with low-interest loans, and then turn a profit, this debt can be considered good. Just be sure to ask yourself if your monthly payments are manageable and if your business will financially grow from this debt.

What is bad debt?

Bad debt is expensive debt that hurts you financially. They typically have high interest rates and might be connected to purchases that quickly depreciate. Keep in mind that bad debt may look like good debt at first and it will be up to you to avoid financial mishaps. For example, if you obtain a mortgage you cannot afford to pay, it can quickly become bad debt. Taking out a loan for a failing business can be another example of good debt turning bad.

Credit Cards

With interest rates usually above 20%, credit cards are some of the most expensive debts you can have. On top of the high interest rates, the low minimum payments can lead many borrowers to keep debt over longer periods of time. While the general rule is to keep your credit card balances below 30% of your credit limit, you should always try to pay off your balance in full each month. If you find it hard to make a dent in your credit card debt, it might be a sign that you have too much to handle.

Car Loans

Believe it or not, car loans are often viewed as bad debt. This is mainly because your new car will lose some of its value the moment you drive it off the dealership lot. In fact, most new cars lose about 20% of their value within the first year after purchase. While experts say that saving up to buy a used car in cash is your best option, this is not always realistic for buyers. That said, if you must go into debt to purchase a car, you should seek an auto loan with low interest. You should also try to purchase a car that holds its value.

Conclusion

It’s important to note that while good debt can have potential benefits, it still requires responsible financial management and repayment. Additionally, the classification of debt as good or bad may vary based on your individual circumstances, financial goals, and risk tolerance. Most importantly, never take on more debt than you can manage. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose debts have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation.

June 26, 2023
Navigating Student Loan Forgiveness Programs: What You Need to Know

Student loan forgiveness has been the talk of many news outlets lately, especially with President Biden’s plan’s fate resting in the Supreme Court’s hands. If the Supreme Court deems the plan constitutional, then millions of borrowers are set to be forgiven of up to $20,000 in student loan debt. If not, or if a decision is not made by June 30^th, then payments will be set to resume in October 2023. Either way, it’s important to know all the options available to you, especially if you cannot afford your payments.

Types of Loan Forgiveness

Before we dive into the different programs available, we should first discuss the types of loan forgiveness. You may hear the terms loan forgiveness, cancellation, or discharge and assume they all mean the same thing. While they are similar in the sense that you do not need to repay some or all of your loan with these terms, they do have some differences. Loan forgiveness or cancellation often indicates that you do not need to continue making loan payments because of something related to your job. On the other hand, loan discharge typically means that you are not required to make loan payments because of other circumstances, like your former school closing.

Income-Driven Repayment Forgiveness

Many student loan forgiveness programs have specific requirements to be eligible for them. For example, income-driven repayment (IDR) forgiveness has income requirements. If you enroll in an income-driven repayment plan, your loan payment will be maxed out at a certain percentage of your monthly income. After 20 to 25 years of payments, your remaining debt is eligible for forgiveness. This type of forgiveness would be ideal for those who have big loan balances compared to their income.

Forgiveness for Teachers

Some teachers may be eligible for Teacher Loan Forgiveness if they’ve worked full-time in a low-income elementary or secondary school for at least five consecutive years. To qualify, teachers must have a federal Direct or Stafford loan that was taken out after October 1, 1998. Qualified teachers can have up to $17,500 forgiven depending on the subject they teach. This program is ideal for teachers who do not have a lot of student loan debt and who do not qualify for the more generous Public Service Loan Forgiveness program.

Public Service Loan Forgiveness (PSLF)

Certain government workers with federal student loans may qualify for public service loan forgiveness. This can include firefighters, teachers, nurses, military personnel, religious workers, government workers, and even some nonprofit workers. To qualify, you must have made at least 120 payments, or 10 years’ worth, while working for the government. There are some temporary policies in place with PSLF due to COVID-19, so you should check with your loan provider about your specific situation.

Perkins Loan Cancellation

Some borrowers may have a Perkins loan, which are subsidized loans for low-income students. While this loan program does not exist anymore, borrowers with this loan can still seek cancellation for existing loans. Borrowers with Perkins loans who worked in public service for five years may be eligible for student loan cancellation.

School Closure Discharge

If your school closes permanently, you may be eligible for loan discharge. To qualify, you must have been enrolled or have left within 120 days of the closing date. If you received a degree from the school, you do not qualify.

Total and Permanent Disability Discharge

You may qualify for loan discharge if you become totally and permanently disabled, whether it’s mentally or physically. This also includes any parent who took out a loan and becomes totally and permanently disabled. Proof of your disability will be required to apply for this discharge.

Other Types of Loan Discharge

You can also become eligible for loan discharge in the case of a borrower’s death, including the student of a parent borrower. In some rare cases, student debt can be discharged in bankruptcy. Borrower defense to repayment allows student debt to be discharged if your school did something or failed to do something related to your student loan. False certification discharge may allow your loan to be discharged if your school incorrectly gives you a loan when you are not eligible for one.

What if I’m not eligible for student loan forgiveness?

Although there are several programs available, you may find that you are not eligible for any student loan forgiveness program. If this is the case, it might be time to start looking at your repayment options. This is especially true if you already find yourself having trouble affording your payments. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose debts have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation.

June 13, 2023
How to Make Realistic Financial Goals
For many, finances are a constant worry. You may wonder how to get out of debt, how to afford a home, how to increase your portfolio returns, and so much more. The key to these questions lies in setting realistic financial goals. Here, we will guide you through the process of creating achievable financial goals that we hope will empower you to take control of your financial future.

Assess Your Current Financial Situation

Before setting any goals, it’s crucial to have a clear understanding of your current financial status. Evaluate your income, expenses, debts, savings, and investments. Create a comprehensive snapshot of your financial landscape. This process can be scary and overwhelming, but it will provide the foundation for setting realistic goals.

Define Your Financial Objectives

Now that you know where you stand financially, it’s time to identify your long-term and short-term goals. Long-term goals could include saving for retirement, purchasing a house, or starting a business, while short-term goals might involve paying off credit card debt, establishing an emergency fund, or saving for a vacation. Be specific and prioritize your objectives based on their importance and feasibility.

Make SMART Goals

You may have heard of SMART goals, or goals that are Specific, Measurable, Attainable, Relevant, and Timely.
- Specific: Specific goals should very clearly define what you want to accomplish, as well as who is responsible for achieving the goal. For example, instead of saying “I want to save money,” specify “I want to save $10,000 in the next 12 months.” You may even want to take this a step further by specifying the steps that need to be taken to achieve this goal. For example, “I want to save $10,000 in the next 12 months by putting $750 away each month as well as my $1,000 end-of-year bonus.”
- Measurable: Measurable goals should set targets that can be quantified. This allows you to track your progress and stay motivated. Our previous example of wanting to save $10,000 in 12 months is measurable because we can easily measure our progress toward that goal. For example, you should have about $4,500 saved by the six-month mark. If you have less than this amount saved, we can determine that you are behind on your goal and should try to supplement savings when you can.
- Attainable: Attainable goals should be challenging but within reach. Consider your financial resources, time commitments, and constraints. Saving $10,000 in 12 months is definitely doable for someone who can afford to save $750 per month. However, if this is not the case, then this goal is not attainable and should be adjusted.
- Relevant: Relevant goals should align with your overall financial aspirations and values. They should be meaningful and align with your personal circumstances. For example, you should be thinking about why you may want to save $10,000 in 12 months. Perhaps the extra $10,000 gets you closer to a down payment on a home, or it allows you to take a vacation, or financially prepares you for parenthood. Whatever the reason, be sure your financial goal is relevant in your life.
- Timely: Finally, set a deadline for achieving your goals. This creates a sense of urgency and helps you stay focused and on track. In our example, having a clear timeline of 12 months helps us stay on track and determine if we are successful. Without this portion of our goal, it’s easy for it to be placed on a back burner and be forgotten.
Setting realistic financial goals is the first step towards achieving long-term financial success. By assessing your current situation, defining SMART goals, breaking them down into actionable steps, and tracking your progress, you can achieve any financial goal. If one of your financial goals is to become debt-free but you’re having trouble achieving it, Debtmerica Relief can help. If you need help with debt, give us a call at 800-470-8155 for a free consultation.
May 30, 2023
Should I Use My Home Equity to Pay Off Debt?
In today’s financial environment, homeowners looking to get out of debt typically turn to their most valuable asset: their home. Individuals can use home equity to pay off outstanding debts by tapping into the accumulated value of their property. However, before going on this financial adventure, it is critical to weigh the pros and cons. In this blog post, we’ll look at the advantages and disadvantages of using home equity to pay off debt, so you can make an informed decision about your financial future.

What is home equity?

Before making the decision of using home equity to pay off debt, we need to first fully understand what home equity is and how you can access it. In short, home equity is the part of your property that you genuinely own, free and clear of all debts. For example, if your property is currently valued at $500,000 and you have paid off $200,000 of the mortgage, your home equity is $300,000 ($500,000 – $200,000).

It is critical to understand that home equity is not liquid cash. To gain access to your home equity, you must often apply for a loan or set up a line of credit secured by your property. A home equity loan is like most traditional loans in the sense that you borrow a set amount of money one time and then make payments during a fixed period of time. A home equity line of credit (HELOC), on the other hand, allows you to access a revolving line of credit, similar to a credit card. With a HELOC, you only pay interest on the amount you borrow, and minimum monthly payments are required. Your first step in using home equity to pay off debt is to first decide which borrowing option is best for your specific financial situation.

What are the pros of using home equity to pay off debt?

Now that we have a better understanding of how home equity works and what options are available, we can discuss the pros of using it to pay off debt.
1. Lower interest rates: The potential for lower interest rates is a big benefit of using home equity to pay off debt. Home equity loans or lines of credit often have lower interest rates than credit cards, personal loans, or other high-interest obligations. This can mean huge long-term savings, helping you to pay off your obligations more quickly.
1. Consolidated (and possibly lower) payments: Consolidating debts with varying interest rates and payment schedules into a single home equity loan or line of credit can simplify your finances. Because you’ll just have one monthly payment to consider, consolidating your debts makes it easy to track your progress. Furthermore, debt consolidation may boost your credit score by lowering your overall credit utilization rate. That said, it can also lower your monthly payment.
What are the cons of using home equity to pay off debt?

While a home equity loan for debt consolidation may work for some people, it is not always the best option. Some of the cons of using home equity for debt repayment are:
1. Risk of losing home: The potential loss of your house is one of the most serious risks related to using home equity to pay off debt. You subject yourself to the possibility of foreclosure if you fail to make timely payments by offering your property as collateral. This danger is especially relevant if you are unable to adequately handle your new loan or line of credit. As a result, it is critical to exercise caution and have a solid repayment plan in place.
1. Increased debt: Using home equity to pay off debt may result in additional debt accumulation. After you’ve paid off your previous debts, it may be tempting to use your home equity for other purposes, such as home improvements or other expenses. This type of behavior might lead to a debt cycle, compromising your financial stability in the long run.
1. Added fees: It is critical to examine the associated fees when using home equity to pay off debt. A home equity loan or line of credit may incur closing costs, appraisal fees, and other expenses. These upfront costs can reduce the potential benefits of lower interest rates, particularly if the debts being consolidated already have low interest rates. You should analyze these expenses carefully to ensure they are in line with your financial goals before making any decisions.
Should I use home equity to pay off debt?

For homeowners seeking financial relief, using home equity to pay off debt can be a strong resource. Lower interest rates and consolidation payments can all greatly help your financial situation. However, these advantages must be balanced against the risks of losing your property, accruing further debt, and incurring upfront costs and fees. When making such a large financial commitment, careful consideration and detailed financial preparation are essential. Remember that speaking with a financial expert can provide crucial advice suited to your individual situation. If you need help with debt, give Debtmerica a call at 800-470-8155 for a free consultation.
May 20, 2023
How Much Debt is Too Much Debt?
The word “debt” is often associated with images of stress, past due notices, piling stacks of bills, and possibly a low credit score. However, if managed properly, debt can be a good thing. In fact, some debt is almost always necessary if you want to acquire certain things like a home, new car, or higher education. The question most individuals want answered though is “How much debt is too much debt?” In other words, at what point does debt become unmanageable?

How Do We Measure Debt?

One of the most efficient ways to measure your debt is to calculate your debt-to-income (DTI) ratio. Your DTI ratio is essentially a comparison of all your monthly debt obligations and your gross monthly income. This ratio is used often by lenders to measure your ability to repay money you want to borrow from them. DTI ratios are read as percentages. The lower the percentage, the less of a risk you are considered to lend to. On the other hand, a higher percentage can indicate that you may borrow more than you can afford to repay, thus making you a risky borrower.

How Do I Calculate My Debt-to-Income (DTI) Ratio?

You can calculate your debt-to-income ratio by taking all your monthly debt payments and dividing it by your gross monthly income. Your monthly debt payments should include bills like:
- Monthly rent or mortgage payment
- Auto loan payment
- Student loan payment
- Other loan payments
- Alimony or child support payments
- Minimum credit card monthly payment
- Other debts
Once you tally up the total cost of your monthly debt, divide it by your gross income. This is your income before taxes are removed. For example, let’s assume you earn $6,000 per month before taxes. Your monthly debt obligations include a $1,500 rent payment, a $300 car payment, and a $100 credit card minimum payment. Your total monthly debt adds up to $1,900. If you divide that by your $6,000 monthly gross income, you end up with a DTI ratio of about 32%. What does this mean though? Next, we’ll discuss what a good DTI ratio is and how you can improve yours.

What Is a Good Debt-to-Income (DTI) Ratio?

When it comes to DTI ratios, there’s a scale that is widely used that helps determine if we have too much debt.
- A DTI ratio of 36% or less is considered good, meaning your monthly debt obligations are considered affordable compared to your monthly earnings.
- A DTI ratio between 36% and 42% is considered borderline, meaning that you may need to look into how you can pay off some of your debt until you can lower your ratio.
- A DTI ratio between 43% and 50% is considered bad, meaning it’s time to take action to reduce your debt. You may consider seeking help from a debt relief agency.
- A DTI ratio of 50% or more is considered a very high risk. At this point, it may be time to consider serious measures, like bankruptcy, to relieve the issue.
How Can I Reduce My Debt Obligations and DTI Ratio?

If your debt still feels manageable, but you find your DTI ratio is borderline, you might want to to begin taking action to reduce your debt to avoid falling into the bad DTI range. The most obvious thing to do is to pay down some debt. If you cannot pay off debt immediately, another option is to consolidate your credit cards to lower your monthly payment. If you have other loans, you may consider refinancing those. If your DTI range is in the bad range, it’s important to take serious action soon. Seeking help from a debt relief company can make the debt repayment process much easier and worry-free. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose debts have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation.
April 21, 2023
What You Need to Know About Joint Debt
You can obtain joint debt in several ways. The most obvious way is when you get married and begin to share finances, including a mortgage, auto loan, credit cards, and more. However, there are less obvious ways to obtain joint debt. Perhaps you applied for a credit card with your child to help them build their credit score. Maybe you co-signed an installment plan for a good friend. In this article, we will break down joint debt and who is responsible for it.

What is Joint Debt?

Joint debt is debt that you and another person(s) become responsible for after entering into a financial agreement to obtain the debt. When it comes to joint debt, there is no “my half” or “your half.” Both you and the other person are responsible for the full amount of debt. This means that if you have a verbal agreement to each pay half of the debt, but the other person suddenly cannot afford to pay, you are still responsible for the debt. This also means that in the case of credit cards, you are responsible for the balance owed, even if you do not contribute to making purchases on the card. Joint debt usually arises from mortgages, credit cards, loans, and lines of credit.

On the positive side, joint debt allows two or more people to combine their resources, like income, assets, and credit scores, to obtain greater amount of credit. Doing so allows for larger purchases to be made. For example, you may not qualify on your own to purchase a home, but an additional income and credit score might be able to help you qualify. Joint debt can also help get someone’s credit history started or even repaired in some cases. For example, if you have a good friend who does not have the best credit and therefore does not qualify for many loans, your co-signing can not only help them qualify, but it can also give them an opportunity to repair their credit by paying off the debt.

When Am I Responsible for Joint Debt?

If you enter a joint financial contract with a friend, family member or partner, you are fully responsible for the joint debt that arises from the contract. Let’s look at a few special scenarios that still make you responsible for joint debt.

Am I Responsible for Joint Debt After a Divorce?

If you and your partner divorce, you are both still legally responsible for any joint debts you have. For example, if you co-signed an auto loan for a vehicle that your partner drove during your marriage, you are still responsible for the balance owed. The specific rules surrounding debt and divorce or separation vary by state, so you should check your state laws for accurate information. For example, 41 states currently have equitable division of debt, meaning that the spouse with higher income is typically awarded more assets and may also be assigned more of the joint debt. The other nine states follow community property law, which means that assets and debts are typically divided 50-50.

Am I Responsible for Joint Debt After a Bankruptcy?

A bankruptcy filing only addresses the liabilities of the person who filed. For example, if a person files for bankruptcy without their spouse, only the spouse who filed for bankruptcy will have their debts discharged. This means that the non-filing spouse would still owe the joint debt. Married couples can file a joint bankruptcy, but it is common for just one spouse to file to wipe out certain debts while maintaining the credit and assets that belong to the other spouse.

Am I Responsible for Joint Debt After a Death?

In general, a surviving spouse is not responsible for the deceased spouse’s individual debt. However, if the debt was shared, or if you live in a community property state, you may be responsible for your spouse’s debt after their death. The law varies within each community property state. It’s also important to note that if you signed, or co-signed, any medical authorizations or hospital admission forms, you may be responsible for medical bills your spouse incurred before death. It’s not uncommon for a surviving spouse to be targeted by creditors seeking payment for your spouse’s debt, so it’s important to know which debts you are legally responsible for.

Should I Have Joint Debt?

If you live in one of the community property states, having joint debt is almost inevitable. These states include:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
This means anything earned, owned, or owed during marriage is community property, or property that belongs to both you and your spouse equally. Anything earned, owned, or owed before marriage or after separation is separate property. This also includes anything bought or earned with separate property. For example, if you had a car before marriage, and sold the car to buy another car with just the sale money, the new car would be separate property. Additionally, any gifts and inheritances earned before or during marriage, or after separation is separate property. The rules around joint debt can be extremely complex and speaking to an attorney can be the best way to understand what debt you are responsible for, and what you are not. If you find that you are responsible for joint debt, Debtmerica Relief can help. Give us a call at 800-470-8155 for a free consultation.
April 7, 2023
How Debt Relief Works
When debt becomes unmanageable, you might investigate options for debt repayment and debt relief. While debt repayment involves paying back borrowed money to creditors, debt relief might be able to shave money off your balance owed. Here’s a breakdown of what debt relief is and how it works.

What Is Debt Relief?

Debt relief, also known as debt settlement, is when your debt is settled for less than the actual amount owed. It is typically a last resort for people who have an overwhelming amount of debt but do not qualify for bankruptcy, or just do not want to file for bankruptcy. You can pursue debt relief on your own, but many people turn to debt relief companies in hopes that experience and credibility will result in a better outcome.

How Does Debt Relief Work?

If you hire a debt relief company to help you, you’ll likely first meet for an initial consultation and financial assessment. They will determine if you qualify for debt settlement. You should note that only unsecured debt qualifies for settlement. This includes:
- Credit card debt
- Personal loans
- Credit lines
- Collections
- Repossessions
- Medical bills
- Business debt
- Some student debt
What many people don’t realize is that debt relief companies will typically advise you to stop making debt payments to your creditors. Instead, they will ask you to deposit the monthly payment into a savings account that they set up for you. While ceasing payments to your creditors can be scary, it will show that you are financially unable to continue making payments. The debt relief company will then contact your creditors on your behalf to argue that they would be better off settling the debt for a lesser amount, rather than risk not receiving another payment. The creditor will then decide if they want to settle and the two parties will negotiate a settlement.

If the debt relief company is successful in earning you a settlement, they will then typically keep a percentage of your total debt as payment.

Should I Pursue Debt Relief?

Going through the debt settlement process can be risky and time-consuming. The potential risks can include:
- Losing money to debt relief companies through fees without certainty of receiving a settlement
- Suspended payments to creditors will hurt your credit score, both through missed payments and the appearance of settled accounts on your credit for up to seven years
- No guarantee that the creditors will accept your settlement, which means lost time, missed payments, and a lower credit score and history
It goes without saying that debt relief can be a high-risk, high-reward type of situation. It will be up to you to decide if it is the right option for you. If you do decide to pursue debt relief, the most important thing to do is make sure you work with a reputable and experienced debt relief company that has a proven track record of helping their clients. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose financial burdens have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation.
March 22, 2023
How a Credit Score is Calculated
Your credit score can impact your entire financial future. It can determine where you live and what you drive. It can control your access to things like banking accounts, credit cards, loans, insurance, and sometimes even jobs. Having a decent credit score is a necessity in the U.S. but how is credit score calculated? What specific actions need to be taken to improve a credit score? Here’s a brief overview of how a credit score is calculated.

What Is a Credit Score?

A credit score is essentially a picture of your credit behavior based on your credit history and reports. There are several credit bureaus that use different scoring methods, but generally your score is between 300 and 850. Typically, the credit score ranges are:
- 300-579: Poor credit score
- 580-669: Fair credit score
- 670-739: Good credit score
- 740-799: Very good credit score
- 800-850: Excellent credit score
A lower score can result in unfavorable loan terms or ineligibility for a loan altogether, while a higher score demonstrates an ability to pay back a loan on time.

What Factors Impact My Credit Score?

There are five key factors that affect your credit score: payment history, account balances, length of credit history, types of credit, and new credit accounts.

Payment History

Your payment history has the most weight on your credit score, representing 35% of your score. When credit bureaus look at your payment history, they take note of your payments to credit cards, lines of credit, auto loans, and more. They will also look at how many past due payments you have, as well as if you have any delinquencies, like bankruptcies, collections, and liens.

Account Balances

How much of your credit is being used also has a high impact on your credit score. In fact, it makes up 30% of your score. If you have high balances on your accounts to the point where you are nearly maxed out, your credit score is negatively impacted. Credit bureaus look at the percentage of debt you have on each line of credit, or your utilization rate. Most credit bureaus recommend that you do not use more than 30% of your credit line.

Length of Credit History

The length of your credit history makes up 15% of your credit score. This portion of your score paints a picture of how long you’ve had each line of credit on your report. Those who are just starting to build their credit are negatively impacted by this factor, while those who have established credit will benefit from it.

Types of Credit

It’s not all about how many credit lines you have, but also what types you have. This factor makes up 10% of your score and you will benefit from it if you have several types of credit, like auto loans, credit cards, mortgages, and so on. This factor helps creditors determine if you can manage a wide range of credit accounts.

New Credit Accounts

Finally, creditors want to see if you frequently open new accounts, making you a riskier borrower. This factor makes up the last 10% of your credit score and is determined by how many new inquiries you have on your credit report, even if you did not go through with the borrowing.

How Can I Improve My Credit Score?

To improve your score, the most effective thing you can do is to make your monthly payments in full and on time. One late payment can drop your score a few points, and sometimes much more. Keep in mind that according to credit bureaus, a late payment is one that is 30 days overdue, not one that is a couple days or even weeks late. You’ll also want to ensure that your credit utilization rate is at or below 30% at all times. If you’re well above 30% on a credit card, you might want to look into getting a balance transfer card to help offset the utilization rate. To help the length of your credit history, try to avoid closing credit accounts as doing so can affect the average age of your accounts. You don’t have to spend frequently, but charging a card every now and then can help keep the account active. Finally, once you have established your credit and you have a good handle on your debt, you can try to boost your score by opening a different type of credit account.

Debt Relief is an Option

We cannot stress the importance of a good credit score. While the unwritten rules state you should have a healthy amount of debt, you should ensure that you are able to repay the debt within a reasonable amount of time. Opening new accounts without being certain you can pay them off can result in unmanageable debt. A good rule of thumb is to first determine if you can pay off your debt within five years while still affording your other expenses. If this isn’t possible, the best option may be to work with a debt relief company. Debtmerica Relief has over 16 years of experience in providing relief to our clients whose financial burdens have become too much to handle. If you need help with debt, give us a call at 800-470-8155 for a free consultation.
March 9, 2023