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Ann Arbor Law Blog

The positives of getting a prenup

A prenuptial agreement, or prenup, is a legal document that individuals can use to specify how their assets will be handled should they get a divorce. Couples in Pennsylvania who are thinking about getting married should carefully consider how prenups could protect their financial interests.

One situation in which a prenup is advisable is when one spouse has accumulated or inherited more assets than the other. While assets that belonged to an individual before marriage usually remain theirs after a divorce, there are exceptions. Couples who are getting married can save themselves both money and time in the future by specifying how their assets are to be handled if a divorce occurs.

Credit card debt forgiveness is rarely a panacea

Credit card debt forgiveness may seem like an attractive option to Michigan residents who are struggling financially, but they may find that pursuing this course of action is futile because debt collectors expect a sizeable upfront payment before agreeing to forgive part of what is owed. Another problem with debt forgiveness is that it does little to help credit ratings as these offers are not generally made until accounts are seriously delinquent and credit scores have already plummeted precipitously.

Pursuing credit card debt forgiveness can also lead to tax problems as any debt that is forgiven is considered income by the Internal Revenue Service. Financial planners advise borrowers to avoid this situation by contacting their credit card providers before their accounts become 60 or more days past due. While lenders may not be willing to forgive part of the balance in these situations, they could offer to reduce or eliminate interest charges for up to a year. However, interest will usually still accrue and be added to the balance. This leads to an unfortunate situation where consumers are expected to pay interest on interest.

Planning for the school year following divorce

Any new school year in Michigan comes with an understandable range of emotions for children, from apprehension about new teachers and classes to excitement about playing favorite sports. For children adjusting to a post-divorce life that includes splitting time between two homes, there can be added stress associated with getting back to school, especially if the end of a marriage is fairly recent. It can be helpful for everyone involved to be on the same page with how school-related issues will be handled to make the transition easier for children.

A good starting point is for parents to get a clear idea of what goals their child has with academics and extra-curricular activities. If family law matters that may include a contentious divorce have made it difficult for group discussions to take place, the child may be able to discuss their expectations for the new school year separately with each parent. Parents might also want to develop an understanding of how extra expenses related to school activities will be handled. Some divorced couples prefer to split such costs evenly while others prefer to do it based on income. In some situations, it may be appropriate to determine how much a child can contribute with their own efforts.

Credit card delinquency rate rises worryingly

Many consumers in Michigan and around the country are having difficulty meeting their financial obligations despite low unemployment, rising wages and sustained economic growth according to figures from the Federal Reserve Bank of St. Louis. The bank says that the credit card delinquency rate has risen from 2.12 percent during the second quarter of 2015 to 2.47 percent currently, which means that more than $20 billion in this type of revolving debt is currently at least 30 days past due.

While soaring delinquency rates are a serious concern, economists are even more worried about the reasons why so many Americans are finding it hard to pay their bills. When the consumer advice and information website NerdWallet asked more than 2,000 consumers why they had failed to make their minimum monthly credit card payments, almost two-thirds of them said that they just did not have the money. One in three said that the cash they had earmarked for paying their credit card bills had been used to cover the costs of essentials like food, rent or utilities. A further 32 percent told NerdWallet that an unexpected expense or emergency was to blame.

3 tips for avoiding bankruptcy this holiday season

With summer ending, the holidays are just around the corner. If you are on a tight budget, you may have a lot of concerns about the holiday season already. Buying presents and decorations can put a strain on your finances.

This can be especially troubling if you are dealing with other expenses and struggling to make ends meet. If you are not careful, holiday shopping could put you one step closer to bankruptcy. Here are some tips to avoid bankruptcy during the holidays.

Bankruptcies increase among elderly Americans

An increasing number of elderly people in Michigan and across the United States are filing for bankruptcy, especially as wealth inequality continues to deepen. Several studies have indicated that older Americans are suffering from escalating financial problems. Between 1991 and 2016, the bankruptcy rate for Americans over 75 more than tripled. At the same time, bankruptcy filings for people between 65 and 74 went up more than two-fold. While a larger number of people are growing older as Baby Boomers retire, the growth in bankruptcies far outstrips the demographic changes.

Out of those who file for bankruptcy, one out of every seven is aged 65 or older. This represents a 500 percent increase over 25 years, according to one study. In 2007, the average age of a filer for bankruptcy was 44.4 years. However, the average age was 48.5 a decade later. While this may seem like a small increase, it reflects the overall aging of the bankrupt population. Between 2013 and 2016, 12.2 percent of all bankruptcy filings belonged to Americans aged 65 and up.

The four types of child support cases

Child support programs in Michigan and around the country were established to ensure that children receive the care they need and do not become burdens on the state. Title IV of the 1975 Social Security Act allows the federal government to send states incentive payments to help them enforce child support orders and collect delinquent payments. All types of child support cases now include the designation 'IV."

Child support arrangements that are established privately between custodial and noncustodial parents, which often occurs after a divorce, are referred to as non-IV cases because state and federal agencies are not involved. However, these arrangements may be reclassified to what are known as IV-D child support cases when payments are not received by custodial parents in a timely manner. In such instances, the cases will be referred to the Office of Child Support Enforcement. This is the designation used when custodial parents are being assisted by the authorities in some way such as to collect delinquent payments or establish paternity.

Student loan debt stresses marital relationships

For many young people in Ann Arbor, student loan debt represents a major burden on their financial, personal and social lives. Many millennials have postponed important life milestones like marriage and children because they first want to address mounting educational debt. Student debt has grown across the country and is far greater than in past decades. On average, a borrower owes $34,144 in student loan debt; for people who graduated as part of the class of 2017, that number is even greater, coming in at an average of $39,400.

The stress caused by this student loan burden may not only cause millennials to postpone marriage, it can also undermine existing marriages. As financial stresses are one of the most common causes of divorce, it comes as no surprise that student loan debt can be a major factor. Among one survey of student loan borrowers, 43 percent reported regularly arguing with their partners about financial issues. Another study found that a third of divorced people with student loans said that their debt burden played a role, with other economic concerns, in their divorce. For 13 percent of respondents, student loan debt was specifically to blame for the end of their marriages.

Racial bias often plays a role in bail decisions

Judges in Michigan and around the country set bail to ensure that criminal defendants will appear to face trial, and remand is generally reserved for individuals who are considered a flight risk or could pose a danger to the general public. These decisions should be based on the character of the defendant and the nature of the crimes they are charged with, but a study published in the Quarterly Journal of Economics suggests that judges are often influenced by racial bias and unfounded stereotypes.

A team of researchers studied cases involving more than 150,000 criminal defendants who had bail hearings in Philadelphia or Miami between 2006 and 2014, and they found that white defendants were generally treated far more leniently. The study, which was published on May 30, reveals that the average bail set for black defendants was $7,281 higher than it was for white defendants and black defendants were 2.4 percentage points more likely to be kept in custody.

Is bankruptcy a good idea if I own my home outright?

Many people work hard for years to pay off their homes. When you paid yours off at long last, you must have felt incredibly proud. Whether your mortgage lasted for 15 years, 30 years or another length, it was too long. You must have often felt like no end was in sight.

However, you have since run into financial trouble, perhaps due to credit card bills, scammers, medical bills or something else. Bankruptcy is one potential way that you could help yourself, but would you lose the home you worked so hard for?

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