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What Are the Pros and Cons of Filing for Bankruptcy? (Part 1)
Millions of Americans struggle with debt. In many cases, debts are necessary, and they can ensure that a person will be able to buy a home, vehicle, or other important items. Other debts may come about because of unforeseen financial difficulties, such as credit card balances that may become impossible to repay because a person lost their job after making a large purchase. If you have significant debts, you may be looking at your options, including the possibility of filing for bankruptcy. As you review your finances and consider the path ahead, it is important to understand the potential benefits and drawbacks of pursuing debt relief through bankruptcy.
Benefits of Bankruptcy
While the primary reason to pursue bankruptcy is that it may allow you to eliminate your debts, there are a number of other benefits that you may also be able to realize. These include:
What Are the Debt Limits for Chapter 7 or Chapter 13 Bankruptcy?
If you are struggling with debts due to financial issues that have affected your ability to repay what you owe, you may be considering bankruptcy. By filing for bankruptcy, you can put a stop to creditors' attempts to collect debts, and when you complete the bankruptcy process, certain debts may be eliminated, allowing you to receive a fresh start. However, there are requirements that must be met in order to qualify for different types of bankruptcy, and debt limits may apply in some cases. Recent changes to the bankruptcy laws may affect whether you can qualify for a Chapter 13 bankruptcy or whether you may need to file for Chapter 7 bankruptcy.
How Have Chapter 13 Debt Limits Changed?
In June of 2022, Congress passed the Bankruptcy Threshold Adjustment and Technical Corrections Act, which changed the debt limits for Chapter 13 bankruptcy cases. Previously, different limits applied to secured and unsecured debts. However, the passage of this law eliminated this distinction, and now, the total debt limit for Chapter 13 cases is $2.75 million. If a debtor's total debts are under this limit, they will be able to file for Chapter 13 bankruptcy.
What Are My Options for Defending Against Home Foreclosure?
Financial issues can affect anybody, and if a person or family experiences setbacks such as the loss of a job, they may have difficulty paying different types of ongoing expenses. In these situations, the most important expenses may need to be prioritized, such as being able to buy food and pay for electricity, water, and other utilities, and a homeowner may be unable to also make mortgage payments. If a family falls too far behind on their mortgage, they risk the possibility of foreclosure. This can be an incredibly stressful situation for a person who is concerned about losing their home, and a family will need to determine their best options for defending against foreclosure and resolving other financial issues they are facing.
Steps Homeowners Can Take to Address Foreclosure
A lender may initiate a foreclosure if a homeowner is at least 120 days delinquent on mortgage payments. For homeowners who have been unable to make payments and are concerned about a looming foreclosure or those who have received notice that a lender is proceeding with the foreclosure process, multiple options for defense may be available, including:
What Is the Process Followed During a Chapter 7 Bankruptcy?
There are multiple options available to those who are struggling with debts. In many cases, bankruptcy is the best way to eliminate debt, and Chapter 7 bankruptcy is often the preferred option. This type of bankruptcy will allow most debts to be completely eliminated within a few months. However, filing for bankruptcy can be a complex process, and it is crucial to work with a skilled attorney to ensure that all of your requirements will be met. By understanding the basics of the Chapter 7 bankruptcy process, you can be sure you will be fully prepared to take the correct steps to eliminate your debts.
Steps Followed in a Chapter 7 Bankruptcy Case
Prior to filing for Chapter 7, you will need to gather all of the necessary documentation. This will include information about your income, the assets you own, and all of your debts. Pay stubs, tax returns, and other documents can be used to show the income you earn and ensure that you pass the means test to qualify for Chapter 7. Listing all of your assets will help determine what is exempt from liquidation and what assets you may be required to turn over during the bankruptcy process. By listing all of the debts you owe, you can ensure that the requirement to repay these debts will be discharged once you have completed the bankruptcy process.
Moving Forward From the Emotional Difficulties of Debt and Bankruptcy
Debt can be a touchy subject for many people. Some forms of debt are unavoidable, such as the requirement to take out a mortgage loan in order to buy a home. Other debts are considered to be frivolous, such as using credit cards to purchase items that a person would not normally be able to afford. Many debts fall in between these two extremes, and while most people have some debts, they will often be able to manage their finances in a way that ensures that they can make affordable payments. However, debts may become unmanageable, and this is often due to unforeseen circumstances, such as the loss of a job or a serious illness.
If you are in this type of situation, bankruptcy may be able to provide relief. However, you may encounter significant stress and other emotional issues as you determine your options for dealing with your debts. By understanding the best ways to address these issues, you can make sure you will be able to move forward successfully and maintain financial stability. Here are some tips on how you can address your emotional concerns as you work to eliminate your debts:
What You Need to Know About Vehicle Repossessions and Bankruptcy in Texas
For most people, owning a vehicle is necessary to ensure that they can travel to and from work and complete other daily activities. Unfortunately, this means that if a person is struggling with debts and cannot make payments on an auto loan, they may be put in an even more difficult position due to the repossession of their vehicle. Anyone who has an auto loan should be sure to understand the types of situations where repossessions may be performed. Those who are facing a repossession may be able to address these issues and avoid the loss of their vehicle by filing for bankruptcy.
Repossession Laws in Texas
In cases where debtors have secured debts, creditors have the right to take possession of the collateral used to secure these debts following a default. This means that if a debtor misses a single payment on an auto loan, the lender may take action to repossess the vehicle. A debtor will need to be sure to understand how the terms of their loan address repossessions so that they will be aware of whether missed payments may result in the loss of their vehicle.
What Are Priority Debts, and How Are They Addressed During Bankruptcy?
A person or family may accrue multiple types of debts. When debts become overwhelming, or when financial difficulties make it impossible to repay what is owed, bankruptcy may be the best option, since it will often allow for the elimination of certain debts. For those who are considering bankruptcy, it is important to understand how different debts will be handled, including those that are considered to be priority debts.
Priority Debts in Chapter 7 and Chapter 13 Bankruptcy
Bankruptcy allows some debts to be discharged, eliminating the debtor’s requirement to repay the amounts owed. Secured debts such as home mortgages or auto loans generally will not be discharged during bankruptcy, since this would lead the creditor to repossess the collateral used to secure the loan. However, unsecured debts can usually be discharged once the bankruptcy process is completed.
Understanding Your Rights Regarding Creditor Harassment and Bankruptcy
If you have encountered financial difficulties that have affected your ability to repay your debts, it is likely that you are experiencing regular calls from creditors. Dealing with these calls or other forms of communication can be very stressful, especially if you are already struggling to cover your regular living expenses. Fortunately, you have protections against creditor harassment under the laws of the United States. By understanding your rights and your options for addressing your debts, you can take the correct steps to stop harassment from creditors as you determine how to return to financial stability.
The Fair Debt Collection Practices Act
Unfortunately, creditors have a reputation for taking inappropriate actions as they attempt to collect debts, and they can often engage in harassing behavior. To address this issue, the federal government has put the Fair Debt Collection Practices Act (FDCPA) in place, and this law details how creditors can contact debtors and attempt to collect debts, as well as the actions that debtors can take to address harassment.
Addressing Negative Ideas About Bankruptcy
In the United States, financial problems are a common issue that affects many people and families. Nearly everyone has some form of debt, and while many are able to manage these amounts and make affordable payments toward what is owed, an increasing number of individuals, married couples, and families are struggling financially. While bankruptcy may be an option for people in this situation, the negative ideas and perceptions surrounding this form of debt relief have caused many people to be hesitant to take this step. By addressing these ideas and gaining a better understanding of the bankruptcy process, debtors can determine whether this may be the best option for them.
Bankruptcy Is Often a Last Resort
Many of the negative perceptions surrounding bankruptcy involve the idea that it is a sign of irresponsibility. Some may think of bankruptcy as a way to avoid the consequences of a person’s actions. Those who struggle with debts may believe that others will think they have spent money wastefully, purchased items they could not afford, or put money toward non-essential purchases rather than paying their ongoing bills.
Can I Buy a Home After Filing for Bankruptcy?
If your family has experienced financial difficulties, and you are struggling to pay the debts you owe while also managing ongoing household expenses, you may be considering bankruptcy. Filing for bankruptcy can provide some immediate relief, since it will create an automatic stay that will prevent creditors from contacting you, seeking repayment of debts, or taking actions such as pursuing judgments, repossessing property, or garnishing your wages. When you complete the bankruptcy process, certain types of debts will be discharged, and you will not be required to pay the amounts owed. While bankruptcy can provide many benefits, you may be concerned about how it will affect you in the future, especially if you are planning to buy a home. By understanding how bankruptcy will affect your ability to obtain a mortgage, you can make plans that will allow you to achieve your goals.
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