People who are suffering from overwhelming debts often find bankruptcy as a way out. Bankruptcy is a legal way to reorganize your finances and get rid of debt so that you can get a fresh financial start. The two main types of consumer bankruptcy are Chapter 7 and Chapter 13. According to a new study, bankruptcy is supposed to not only give you a better financial start but is also good for your finances too!
Consumer Bankruptcy Codes Elaborated
As stated previously, Chapter 7 and Chapter 13 are the most common consumer bankruptcy codes, each having its own advantages. In chapter 7, your attorney and bankruptcy trustee sort your assets into exempted and non-exempt categories. State exemptions generally cover equity in the property (car and home), cash, up to a certain limit, retirement accounts, personal belongings, and other properties. The state of California has two separate sets of exemptions which cover different amounts of diverse properties. While the exempted property is left out, the non-exempt property is sold off to pay your creditors. In case all your property comes under exempt property, you don’t have to surrender anything. After the process ends, any and all unsecured debts are discharged or written off. Chapter 7 case is not meant for everyone, only those people who are in dire need of bankruptcy protection can file under this chapter. To be eligible for it, Los Angeles based bankruptcy law firm Recovery Law Group lawyers inform, you have to pass the state means test.
For those people who are unable to qualify for chapter 7, Chapter 13 is a good option. In this case, you and your legal team develop a repayment plan. This is drawn keeping in view the value of your non-exempt property and your income. Within 3-5 years of your repayment plan, you will be able to make payments on your home mortgage and car payments without losing any property. After the repayment plan is over, any remaining unsecured debts are discharged. Since this chapter provides an option for catching up on mortgage payments depending on your income, it is an excellent option for people with a steady income who wish to avoid foreclosure.
It is important to note that both chapters’ help gets unsecured debts such as medical bills, credit card bills or personal loans discharged. Such unsecured debts are completely erased at the end of your bankruptcy while secured debts like home and car loan are handled in a different manner. Your personal liability in secured loans is removed, i.e. if the property is foreclosed or repossessed and is sold for an amount less than what you owe, you are not required to pay the difference. But, if you wish to keep the property, you need to pay the amount due to you. In this case, you can either make payments for the property and keep it or surrender the property and leave any liabilities.
With both bankruptcy chapters,’ you get to avail the automatic stay benefit. Thanks to this provision, any collection actions by creditors or debt collectors are legally prohibited. Thus your property cannot be foreclosed or repossessed; you are secure from wage garnishment, collection lawsuits, threatening letters, and phone calls. With automatic stay in place, you get time to get your financial affairs in order. You can call 888-297-6203 to consult bankruptcy attorneys to explain in detail how the bankruptcy process works.
Debts and their relation to your health
There is no denying that financial troubles can wreak havoc on your life. Since you are constantly worrying about how to protect your family and provide for them without losing your assets, it is bound to take a toll on your health. Constant financial concern is the most prominent reason for stress in Americans, which often results in ill health. The higher the stress levels, the shorter your life expectancy can be. You are more prone to anxiety, hypertension, heart problems, diabetes, cancer, and other health disorders with elevated stress levels. Thus debt can be responsible for any ill-health you have.
As per a study conducted by the National Bureau of Economic Research, bankruptcy proves to be beneficial for a large number of debtors. The average income for people who filed for bankruptcy increased by $5,000 annually. Even the 5-year foreclosure rate is 20% lower for bankruptcy filers compared to those people who didn’t file for bankruptcy. The most interesting finding is that the 5-year mortality rate is 1.2% lower for bankruptcy filers than non-filers. This indirectly proves that financial stress is alleviated by filing for bankruptcy, thereby improving a chance for people to lead a quality life.
On average, any American house has nearly $16,000 in credit card debt alone! This is big money considering the current economy. Paying back such a huge amount is not easy since a large number of people are using a credit card to pay for monthly expenses and sometimes even utilities. This kind of financial stress can cause numerous health issues in individuals (both physical and mental). More often than not, people who are struggling with debt are unable to find a way to get out of this mess and improve their finances. However, bankruptcy is one of the best ways to get rid of your debt by either consolidating it or paying it off in small installments. In case you too are struggling to make financial ends meet, consulting a bankruptcy lawyer make things clearer for you. Get your case evaluated to find out the best possible way to deal with debts.