Helping With Your Financial Future

Why is bankruptcy sometimes unavoidable?

| Feb 23, 2021 | Uncategorized

Millions of people run into financial problems, and some may find their fiscal situation becomes overwhelming and seemingly impossible to address. Persons struggling with financial problems in California have an option available to them. Filing for bankruptcy might allow for gaining that all-important “fresh start” that helps someone struggle with debt to find a solution. Bankruptcy might not be the solution for everyone, but some may find it represents the only way out of a challenging situation.

People find themselves unable to avoid bankruptcy

Misconceptions may prevail about individuals who seek bankruptcy protection. Assumptions that someone’s “financial irresponsibility” led to financial troubles might be wildly false. People amass incredible amounts of debt for reasons far outside of their control. Medical bills might rank high on the list of reasons why debtors file bankruptcy. Someone who lacks insurance or finds insurance doesn’t pay for everything could end up hundreds of thousands of dollars in debt after a severe medical condition.

Others may lose their jobs or business for circumstances outside their control. Unemployment insurance or other forms of assistance might only go so far. Utilizing credit cards and other loans may lead to short-term fixes that end in untenable debt. Bankruptcy courts exist to help those persons who have no further recourse.

Options for bankruptcy

Bankruptcy takes various forms, and there are personal and business categories. Personal bankruptcy protection falls under Chapter 7 and Chapter 13 rules. For many, Chapter 7 may be the preferred plan since it involves discharging the debt. That is, some obligations may be “wiped out” by the bankruptcy court. Unsecured debt, such as a credit card balance, might be erased. Secured debt, like a car loan, may remain with payment terms possibly adjusted.

Chapter 13 bankruptcy involves the structured repayment of debt over a set period. Discharging tax debt under Chapter 7 is not possible, but working a payment plan in Chapter 13 might be an option. Other reasons may lead someone to explore Chapter 13.

Bankruptcy law does come with complexities, so working with an attorney could help. The attorney may represent a client in bankruptcy court.