Escalating personal debt, unrepayable credit card bills and constant creditor calls may lead some Californians to think about their options for debt relief. For some people, personal bankruptcy can be an important way to work toward a new financial future. There are two major types of personal bankruptcy filings: Chapter 7 and Chapter 13. When choosing the right type of bankruptcy, debtors can benefit from asking certain key questions to determine which option may work best for their circumstances.
California residents who are struggling to keep up with their debts may benefit from filing for bankruptcy. However, it should be seen as a last resort for those who don't have any other options available. In the case of a short-term financial shortfall, it may be best to speak with a lender to work out alternate payment arrangements. This could make it possible to avoid a repossession or serious blemish on a credit report.
Some California residents may be a single medical emergency away from filing for bankruptcy. This is the takeaway from a study conducted by a professor at CUNY Hunter College in New York and several others. The study looked at 910 random bankruptcy filings between 2013 and 2016. Of those bankruptcy filings, 58.5 percent were related to medical expenses. Those who get sick may be vulnerable to losing their jobs, which may cut off access to an employer-based health plan.
In most cases, those in California and throughout the country who have student loan debt cannot discharge it in bankruptcy. This policy was put in place because of a fear that people would simply file for bankruptcy after getting their degree. However, there are exceptions to the rule for those who can pass the Brunner test. The Brunner test is invoked to determine if forcing a person to make student loan payments constitutes an undue hardship.
Financial analysts in California and around the country have been voicing concerns about a looming consumer debt crisis for several years, and their arguments are growing more strident as American households sink deeper and deeper into debt. The financial information website WalletHub keeps track of revolving debt in the United States, and its report for the third quarter of 2018 reveals that American households now owe an average of $8,284 to credit card companies.
California residents facing bankruptcy may be interested in learning about the bankruptcy means test. This test helps to determine whether an individual who is in debt meets the qualifications to file for Chapter 7 bankruptcy. In times past, it was easier for an individual filing for bankruptcy to meet the criteria because the courts had broader discretion in determining if a person was eligible for bankruptcy.
The concept of allowing a debtor to get relief from unmanageable economic distress with a fresh start has a long history in the U.S., dating back to bankruptcy's incorporation within the Constitution. Although bankruptcy operates under federal jurisdiction, California has its own state-specific rules. A lot of the state rules concern which items are included and the maximum value for property that is exempt from attachment by creditors.
According to a report from Lending Tree, California residents who file for bankruptcy may be able to rebound from it relatively quickly. The report indicates that about 40 percent of Americans have a credit score of 640 within a year of filing. That improves to 65 percent within three years of filing. Having a good credit score is one of the most important attributes to have when applying for a mortgage after a bankruptcy.
Many consumers in California recognize that a crisis like a job loss or medical emergency can force someone to borrow money. Credit card marketing and the temptation of payday loans represent two more forces that can push people into taking on debts that they cannot repay.