Financial challenges can happen to any Texan, but there are certain segments of the population that are particularly vulnerable. Young adults who are just starting out in the world are prone to overspending.
Perhaps they have just gotten married, have good jobs, purchased a home, overextended themselves on credit cards and made aggressive investments. Combining these strategies with the unexpected obstacles that arise in life can leave people with financial struggles. When they become too difficult to manage, it is wise to begin thinking about viable solutions.
Bankruptcy can be helpful, but which chapter is suitable?
With personal bankruptcy, there are generally two choices: Chapter 7 and Chapter 13. Chapter 7 is a liquidation bankruptcy where the person’s property might be taken and sold to repay creditors. Those who do not have significant property like a home or newer automobiles are likely to benefit from Chapter 7. It clears all unsecured debt like credit cards and medical expenses. Still, for people who made large purchases and want to retain their property, they might want to choose Chapter 13 to have a chance to keep what they have.
Under Chapter 13, the debtor will make payments every month to a trustee. The trustee will repay creditors for what is owed. This is for people who have jobs and consistent incomes – which is common for those in their late-20s who are out of college and had the cash and credit to purchase a home and invest. The payments are comparable to a consolidation loan that lasts for three or five years, depending on the situation.
Chapter 13 will let the debtor keep their home from being foreclosed upon. They can incrementally get caught up with what they owe on their mortgage. There are requirements that must be met. The combination of what they owe cannot go beyond $2.75 million. They cannot have filed for Chapter 13 or other types of bankruptcy and had the case dismissed for willfully failing to adhere to the plan in the previous six months.
Fixing financial mistakes through Chapter 13 can provide a new start
Chapter 13 bankruptcy is a method that many have used to get into a better financial situation. It is important to remember that there are tradeoffs when filing. Making the payments on time and in full is crucial. Maintaining sensible spending habits and avoiding the same mistakes the got the debtor in trouble in the first place is imperative.
People have understandable fears when they think about bankruptcy. In addition to losing property, they may be hesitant because of misconceptions about it and that it makes them appear as if they are running from their debts. These are mistaken assumptions. Retaining properties and clearing debt in an efficient manner can be a lifesaver for debtors who do not know where else to turn. Obviously, the pieces should be in place for a successful Chapter 13. In exchange, they will keep their home, pay off their debts and be ready to restart their financial lives.