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Lexington Bankruptcy Blog

Chapter 7 bankruptcy often better choice than short-term loan

Financial problems are not just the concern of those seeking employment. All too often, Kentucky residents with full-time employment face moments when it seems impossible to make ends meet. Day in and day out, these individuals spend hours trying to earn enough to pay the bills, but it just never seems to be enough. When this is the case, it may be in the individual's best interest to file for Chapter 7 bankruptcy.

Over the years, various forms of lenders have made loans available to those who are struggling. These borrowers are looking for a way to get past today's crisis and make it to the next payday. Unfortunately, many borrowers discover that these types of loans only lead to more debt and increased financial problems.

Chapter 7 bankruptcy or Chapter 13 bankruptcy?

The moment has arrived. The Kentucky resident has faced reality and knows that the debt problem must be addressed. Once this happens, there are various options that should be considered. Rather than attempting to refinance the debt or working with debt consolidation companies, many discover that filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy is a more appropriate solution.

While these two options appear to be quite similar, they do have some significant differences. Chapter 7 bankruptcy offers the individual the opportunity to have the majority of his or her debts discharged. While it is possible that some assets will be liquidated, unsecured debts are discharged and the individual no longer owes these debts. This process takes a little over three months to complete.

Your property might be exempt in Chapter 7 bankruptcy

Harassing creditors, past-due bills and unpayable debts can put tremendous strain on a person who is already struggling financially. Bankruptcy is a trusted and safe option for most people in Kentucky who are facing insurmountable debt, but many have understandable concerns. What property a person will be able to keep during Chapter 7 bankruptcy tends to be a common worry.

When filing for protection through Chapter 7 bankruptcy, individuals are expected to liquidate some of their property into a bankruptcy estate. The property in this estate is then sold to help pay remaining debts. While this is an important part of Chapter 7, it does not mean that debtors must immediately fork over all their property and assets, as certain properties are considered exempt.

How making minimum credit card payments enslaves you in debt

Everyone has done it at some point or another — made only the minimum payment on an open credit card account. Some pay only the minimum every month, and feel grateful they can afford even that.

But if you have been eking out only the minimum payments, you soon will be mired in debt even if you aren't right now.

Renting or buying after Chapter 13 bankruptcy

Financial concerns can weigh heavily one's mind. Many times, filing for Chapter 13 bankruptcy may the solution. Yet, many Kentucky residents fear that this option will interfere with them being able to rent or purchase a home.

While it is true that property owners and managers do look at one's credit report prior to making a rental decision, they are often open to looking beyond just the printed report. Rather than just wait to see what happens, it is often best to address the situation ahead of time. Then, rather than be surprised, the decision maker will be aware of the situation and know the circumstances. Many times, bankruptcy is the result of things beyond the individual's control; this is often an important part of the final decision-making process regarding subsequent credit decisions.

Chapter 7 bankrutpcy and a TSP loan

Over the course of time, some Kentucky federal employees may decide to take out a loan against their Thrift Savings Plan (TSP). Such an action may provide the individual with the funds needed to meet an immediate need. However, it is important to remember that TSP loans are treated differently from other loans throughout the Chapter 7 bankruptcy process.

The TSP is designed to be a retirement savings account. As such, income tax on these funds are deferred until they are withdrawn from the plan. Additionally, if funds from the plan are received in the form of a loan, these funds are not considered to be withdrawn and are therefore not considered as taxable income at the time.

Chapter 13 basics

The alarm clock rings, and the Kentucky worker jumps out of bed, takes a shower, eats breakfast and heads off to work. Day after day, this scenario plays out across the state. For many, the income earned is enough to pay the bills and have a little left over for some extras. However, for some, although they are striving to earn enough to meet their month obligations, they are simply unable to do so. When this happens, chapter 13 bankruptcy may be answer.

Chapter 13 bankruptcy is often referred to as the choice for the wage earner. This is because it is designed to allow the individual who has a regular income to restructure debt into a manner that is more affordable. Depending upon the circumstances, a three- or five-year repayment plan is established. At the end of this time period, certain remaining debts may be discharged.

Debt settlement or Chapter 7 bankruptcy?

The television advertisements are appealing. When one is struggling to pay debts, debt settlement agencies are available to assist in reducing or eliminating debt. While the services offered by these companies are appealing to many Kentucky residents, the benefits of such action versus filing for Chapter 7 bankruptcy should be carefully analyzed.

One service offered by these settlement agencies is the ability to negotiate the amount of the debt owed. Many times, clients are instructed to cease paying bills and instead place the money in a savings account while the company negotiates on their behalf. However, without the protection of the bankruptcy process, creditors can sue for collection and seek to have wages garnished and/or bank accounts seized. Furthermore, once the debt negotiation is finally complete, the balance owed is often reduced, but, the forgiven portion becomes reportable for income tax purposes.

Chapter 7 bankrutpcy answer to rising debt

Housing, cars, clothing and food -- each of these items are a necessity for the Kentucky family. However, each of these items can also be a major expenditure for the family. As these costs climb, the average individual or family often struggles to keep up with the rising costs and the increased debt that each can bring. At times, the debt load can become too much, and action needs to be taken in order to recover and keep up financially. When this happens, Chapter 7 bankruptcy may be the answer.

Studies show that the typical amount owed on a mortgage has increased. In contrast, the number of new mortgage loans being originated and the credit score of new mortgage borrowers has actually decreased. This trend suggests that mortgages may become a problem area for some borrowers.

Is bankruptcy appropriate after a layoff?

Perhaps you've seen the writing on the wall for some time — the dismal quarterly profit reports, the slowly-shrinking workforce — or maybe it came like a bolt from the blue. But either way, the day that you read your own name atop the pink layoff slip will be a shock regardless.

The news of a layoff can undermine a worker's confidence, bring on bouts of depression and erode the infrastructure of one's life. Before doing something that you will later regret, it's important to take stock of your situation and make the wisest decision possible.