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.