Personal debt has been and will continue to be, one of the biggest problems that this country faces.
Inflation and cost of living expenses are rising, but most Americans are not being paid at rates that match the higher cost of living. Because of this, a lot of people are having a harder time paying their bills on a steady basis.
In addition to inflation and the cost of living being on the rise, the COVID-19 pandemic has created another area of concern. Many people have been out of work or working lower-paying jobs due to the pandemic. Most of these people were able to get by on the different unemployment benefits being offered. Unfortunately, many of these unemployment programs have been terminated or have severely reduced the amounts paid out per month.
Americans in many different financial situations live off of credit cards to survive or pay their necessary expenses. From groceries and gas to larger expenses like auto repairs and payments, credit cards are used in many situations as a buffer. It’s not a stretch to assume that the economic conditions created by COVID-19 have intensified these situations for many people.
This accumulation of debt creates an immense burden on the people who owe these debts and are having trouble making payments. If a credit card is maxed out, you then have to find the money to pay both the expenses that the card covered and money to pay off the card itself. In many cases, this can result in creditors pursuing collections and even suing these debtors.
It’s easy to understand how personal debt has been a problem for a while, and how it will continue to be an issue for many Americans in the future.
Consider the extreme conditions of the last year, for instance. This year has shown to be a low year for bankruptcy filings on average. However, even in the middle district of Orlando, there have been 5,000 chapter 7 bankruptcy cases filed so far.
This may not seem extreme, but it still means that 5,000 people in one small city needed debt relief this year — and these numbers do not include chapter 13 filings.
This is just one area of Florida, so there is much more to consider. However, personal debt is a large burden for many Americans, and no one is alone in their fight for financial freedom.
What Exactly Is A Chapter 7 Bankruptcy? Is It Just For Individuals Or Could A Business File? Does Your Firm Handle Business And Personal?
Chapter 7 is for the use of the individual, but it is also applicable for the use of a business.
However, it may be important to know that chapter 7 bankruptcy filings for businesses do not come up that often.
You may be wondering, “Why would a business file for chapter 7 bankruptcy?”
Chapter 7 filings are a useful way to neatly close a business. For example, if you wanted to close a business that has failed, but you had assets remaining in the business that may be used to pay off whatever debt they can reasonably cover, then a chapter 7 filing can be a great way to organize that.
Chapter 7 filings allow you to administer your business’ assets properly. This will help you to avoid running into a situation where you are accused of retaining your assets before using them to pay off the related debt.
If you plan to restart a business or reorganize your business, you’re generally going to file a chapter 11.
What chapter 7 is most commonly used for, is individual bankruptcy. Individuals are the main focus of chapter 7 filings. In chapter 7 filings, you discharge of all of your dischargeable debt and then any of your non-exempt assets become the property of the bankruptcy estate. This is why Chapter 7 is often referred to as the liquidation chapter. However, most debtors can exempt their assets and do not normally have to pay anything to the bankruptcy estate.
Our firm describes chapter 7 filings to our clients as the quickest, fastest, most efficient way to relieve yourself of any dischargeable debt. What’s more, in the vast majority of cases, you’re not going to be paying much of anything to the bankruptcy estate.
When You Are Talking To Someone Who Comes To Your Office And You’re Evaluating Their Financial Situation And Deciding On How To Advise Them, What Are Some Of The Most Important Questions That You’re Asking?
Several questions are helpful to ask when determining the nature of a person’s financial situation. The first thing I want to assess is whether or not they may have a viable case.
Some of the questions I ask have to do with the following:
- Marital Status: It is important to know if a client is single or married because many factors are affected by marital status. I need to know: Am I filing for one person? Am I filing for two people? Or am I filing for a married person who’s filing without their spouse? This can be especially important as, in situations where one spouse files without the other, both spouses’ incomes are still considered in the filing.
- Income Details: How much money does the client make? What has been their gross income in the past six months? In chapter 7 filings, you must qualify for eligibility based on the last six months of gross income for your household. Again, gross income will include that of a non-filer, such as a spouse.
- The Nature of the Debt: While Chapter 7 and 13 filings may offer relief for people in a wide range of financial situations, it does not apply to all. Child support or criminal restitution are not considered dischargeable debts under any bankruptcy filing. Additionally, student loans may be subject to chapter 7 or 13 filings, but they entail a different process and timeline from traditional filings. It is not common for bankruptcy to assist greatly with student loan debt.
- The Nature of Assets: While you may be able to file bankruptcy, it may not be the best option for you. Understanding the nature of your assets and what may be lost is crucial to providing accurate counsel on these matters.
What is dischargeable debt? In general, it is unsecured debt such as Credit cards, medical bills, repossessions, foreclosures, cash advances, loans of that type. Secured debt, like mortgages and car payments, are dischargeable as well. However, you are not required to surrender either your home or car in a Chapter 7 bankruptcy in most situations.
IRS debt may be dischargeable depending on a host of factors. These factors may include the timeliness of the debt, when it was assessed, what type of debt is it considered to be, or if it’s a back tax. If your IRS debt is a penalty of some type, it is probably not dischargeable.
Student loans are complicated to discharge. While it has appeared in case law, you would need a nearly perfect scenario to be remotely successful.
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