Many of our Escondido readers have probably been encouraged by the signs of economic recovery throughout the nation - even if the signs are modest. While the unemployment rate admittedly remains stagnant, consumer confidence seems to be rising. When this happens, people are more apt to start spending money again. However, according to a recent article, this may lead to more Chapter 7 bankruptcy filings.
Bankruptcy filings are down in many American cities, which most people would view as a good thing. From the peak of the recession it appears that many individuals and families are now settling into a new financial reality, even if that does mean learning to live with less. But history has shown that as economic recessions fade from everyday view and from memory, more people are willing to spend again.
There's nothing wrong with spending money earned, but what is difficult for many people is setting up a budget to live by. This one key step can keep many people on the right track financially, and lessen the possibility that a bankruptcy filing will be needed in the future.
However, another point detailed in the recent article is that if someone does get into an untenable financial situation and is looking for a fresh start, Chapter 7 bankruptcy is a popular option. This type of bankruptcy allows a debtor to list their assets against their liabilities, and then a bankruptcy trustee will sell all of the non-exempt assets to satisfy debts. Those debts which cannot be satisfied through the bankruptcy process will be discharged. And, as a result, the filer comes out the other side with a much lighter debt burden and will be set up to change their financial practices for the better going forward.
Source: The Fresno Bee, "Bankruptcy can provide Valley residents relief from crushing debt," Tim Sheehan, Sept. 6, 2013