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Income Interruption – Unless You Have A Safety Net Bankruptcy Becomes A Real Possibility.

At some time in our past a wise sage stated, “Failing to plan is planning to fail”. These words have never ringed truer than in this and age. A financial crisis is looming, some experts claim it is actually upon us, and Americans are faced with the reality that their ill-conceived spending habits are catching up with them. In today’s precarious balance between debt and income all it may take is a slight push to topple the entire thing. One such “push” is a sudden loss of income.

Anything that causes income to decline puts a family at risk for bankruptcy. Layoffs and firings create a vulnerability which if not addressed may start a domino effect in which the one may end up in financial ruin. Bankruptcy then becomes a very real possibility. If you are unable to meet debt obligations, such as your monthly mortgage, being unable to stop foreclosure becomes a harsh reality, which no one really wants to contend with.

Even finding another job doesn’t always solve the problem. The time period without income may create insurmountable debt, especially if one was carrying substantial debt loads prior to the loss of income.

Other income-related setbacks may contribute to the debt versus income mismatch. Unemployment isn’t always the cause of this problem. Losing overtime hours or moving from a salaried position to commission sales for example may be enough to tip the scales.

You may be caught up in a company downsizing, a growing trend these days. If this position provided the majority of a household’s income this has a sudden and drastic effect. People are finding themselves a part of the growing bankruptcy curve because they lost their jobs, often positions held for years and thought secure.

How can one prepare for a potential income loss? The knee-jerk reaction is to save money. Given the relative stagnation of income and salaries over the past decade coupled with the rising costs of living this may be more wishful thinking than reality. Consider first taking a look at your spending habits. This is area most discover they can reduce expenditures, in some cases saving hundreds of dollars monthly. Credit cards, department store cards, frequent dining out, frivolous weekend trips, and many other income-draining activities exist that can be cut back on or eliminated entirely.

You have to decide just how close to the edge you wish to tread. Consider a lesson from our grandparents and great-grandparents. Those generations were forced to live below their means and most were still able to secure a monetary buffer against income interruption.

Take a good hard look at your financial situation. Take advantage of the many agencies offering consumer credit counseling. There are countless resources available to help you once you have decided to take action. Taking action is the key in preparing for the possibility of income interruption.

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Filing Bankruptcy To Stop Foreclosure Brings Long Lasting Consequences-Think Hard Before Deciding.

Filing for bankruptcy to stop foreclosure is likely the last resort for most homeowners. They have exhausted all other means to try to solve the matter to no avail. Before taking the plunge into the chaos that is bankruptcy it is best you fully understand what you are committing yourself to and just how difficult the entire process is.

Filing for bankruptcy is a matter of collecting a great deal of financial and sometimes personal information. The process demands filling out long schedules and forms about your family’s income, assets, and debts. Debt listings include home mortgages, car loans, revolving credit (credit cards), medical debts, and personal loans just to list a few. There are other types of debts that may be involved as well. You may be questioned about spending habits, which for some people is a personal and highly emotional topic. If there is a lawsuit involved things can get complicated very quickly, but for the most part the bankruptcy process is actually straightforward albeit painful and shameful for some.

The majority hires a lawyer to steer them through the bankruptcy process. Costs range from a few hundred to few thousand dollars depending on the case.

Federal laws govern bankruptcy. There are federal courts throughout the country that hear these cases. The most important decision a debtor has to make is what type of bankruptcy they will file. Will it be a Chapter 7 liquidation or Chapter 13 payout plan?

A Chapter 7 requires the debtor to give up all non-exempt property for the benefit of their creditors. In exchange for this they will be discharge from most of their old debts. Some debts survive the bankruptcy. Home mortgages, car loans, child support, and taxes still have to be paid in full. Even afterwards you could still lose your home and any equity built up if you fail to make your mortgage payments. In essence all the bankruptcy did was give you a fresh start in a relative sense. You got rid of the credit card, medical debt, and any unsecured debt but you may still have substantial debts to pay.

Chapter 13 is an alternative to Chapter 7 in that the debtor tries to repay all or part of their debts over time under the supervision of a court appointed trustee. If the payment plan is approved and the promised payments are paid, they may keep all their property and receive a discharge from the portion of the debts they did not pay. Chapter 13 plans typically involve a 3 – 5 year timeframe.

Regardless on which bankruptcy plan you choose to pursue to avoid foreclosure it is important to understand that this solution is not as easy to achieve as it was several years ago. Tough new laws are in place now making it harder for people to even file, much less get a discharge from their debts. So before you decide on this course of action understand the ramifications and the long-term effects it will have on your credit for years to come.

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