On March 10, the results of an extensive study by the Consumer Financial Protection Bureau were released. The CFPB found that binding arbitration clauses in consumer contracts severely limit their ability to be able to sue a creditor in the event of a legal dispute.
Arizona residents who owe thousands of dollars in credit card debt are not alone, according to a recent analysis of Federal Reserve statistics and government data. As of December 2014, the average household in the United States has $7,281 in outstanding credit card debt. When the households without any debt are taken out of the equation, the average household owes $15,608 on credit cards. In total, Americans owe approximately $881.8 billion in credit card debt as of September 2014.
Arizona residents with a lot of credit card debt may feel overwhelmed by what they owe. However, there are some important things to keep in mind that could cause consumers to breath a sigh of relief. The first thing that all debtors should know is that they will never go to jail for nonpayment of a debt. Although there could be some legal repercussions for missed payments, none of those penalties will ever be time behind bars.
In Arizona as in the rest of the U.S., the IRS requires creditors to disclose all canceled debts of $600 or more on a 1099-C tax notice. In most cases, the agency considers canceled debt a form of taxable income, so people failing to report such debts on their income tax returns could receive an audit that could result in additional taxes, penalties and interest. Those who receive these notices may want to speak with a tax professional before filing their income taxes to discuss their options.
In most cases, credit card companies will negotiate with consumers on past-due amounts to come to a settlement agreement. Some companies advertise services to do this for the consumer, and they can help in some cases. It is important to watch for scams, though, because many companies may attempt to take advantage of consumers or lure them in with false information, such as advertisements to settle debts for pennies on the dollar or guarantees that they will make unsecured debts go away. Some even claim to use a "new government program" to do all of this.
When a creditor calls demanding payment for a debt, is that person obligated to pay? The answer to that question depends on whether or not the debt is valid. Those who are contacted by creditors regarding an alleged unpaid debt may request proof that the person actually owes that money. However, this request must be made in writing. It also must be made within 30 days after the creditor makes a request for payment.
Arizona credit card holders who have trouble making their payments due to job loss, divorce, medical expenses or other unforeseen circumstances may worry about the safety of their retirement funds if they default on their credit card agreement. Banks and other creditors must go through a process before they are able to garnish wages or seize funds from a bank account. In most cases, though, retirement accounts are exempt from such seizures.
Arizona residents who are being harassed by creditors may be interested in a Michigan woman's response to overdue charges at Kohl's, the well-known department store chain. The woman has filed a lawsuit against Kohl's for unfair collection practices in relation to the bill.
Just like taking a medication, relying on credit cards can result in side effects for their users. One such effect is assuming that a person can live a lifestyle that he or she cannot afford. Once the amount of available credit runs out, the borrower may feel as if he or she is downsizing their lifestyle, which can lead to disappointment.
According to a recent survey conducted by a consumer financial services company, nearly 30 percent of Americans have a greater amount of credit card debt than savings. This may be putting some individuals in Arizona and elsewhere in a precarious financial situation with their creditors.