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Chapter 7 not the only way to handle credit card debt

Many Americans fear for their financial future. In the current economy, debt runs rampant -- particularly credit card debt, one of the most difficult types of unsecured debt to discharge. Thankfully for Kentucky residents facing serious debt problems, Chapter 7 bankruptcy option when debt consolidation and repayment options have not solved the issue. 

A consolidation loan is often  used to pay down credit card debt at a significantly lower interest rate than simply paying down the principal debt itself. Multiple credit cards can be consolidated into a single monthly payment that allows the individual to pay off existing debt all at once. Of course, a minimum credit score is required in order to qualify for the consolidation loan. 

Steps to counter debt before Chapter 7

Credit card debt is among the most expensive and insidious types of debt facing Americans today. The ability to continue charging a credit card while paying only minimum monthly payments can lead to a serious debt spiral, as some Kentucky families already know. However, there are a variety of steps that can be taken to reduce debt, and for those in untenable debt situations, Chapter 7 bankruptcy remains a powerful option as well. 

It may seem counterintuitive when trying to pay down credit card debt to also allocate funds to savings, but some experts believe a lack of savings will also perpetuate the debt problem. Without savings, any emergency payment required, be it a medical emergency, vehicle malfunction or any other unforeseen issue, will have to be taken care of on a credit card. A good way to start saving is to put away the credit cards for a while and use only what is in bank accounts to pay for goods and services. This will help to gain perspective on spending habits. 

Paying down credit debt, including Chapter 7

With the American credit card debt topping $1 trillion this year, many families are feeling the strain of outstanding payments and overdrawn accounts. Thankfully, there are many ways Kentucky residents can pay down their credit card debt or find alternate solutions to their debt struggles. For challenging cases, Chapter 7 bankruptcy can also be an option to help clear away existing debt woes. 

The first step towards handling credit card debt is taking a full accounting of existing debt and associated interest. Ensuring minimum payments are being paid on time is a critical part of whittling down debt, but writing down balances and interest rates can be a helpful way to start planning a budget. Focusing on a total debt amount can be a daunting prospect, so breaking down debt into manageable sizes can also be helpful in getting started. 

Chapter 7 just one way to handle credit card debt

Credit card debt is a costly and pervasive issue that affects many American households. Here in Kentucky, individuals and families struggle under many different kinds of debt, but few that are accrued on a day-to-day basis. Thankfully, there are a variety of ways to handle unsecured debt of this type, from simple budgeting strategies through to Chapter 7 bankruptcy.

It might seem counterproductive to say so, but savings are a must when paying down credit cards. The reason for this is because most people will encounter unforeseen challenges and costs at some point, and if that individual has no savings, he or she will likely default to a credit card to shore up the difference. Having money put away for emergencies makes it less likely that debt will accrue from unplanned expenses.

Keeping your home when you file Chapter 13 bankruptcy in Kentucky

One of the most frightening prospects of filing bankruptcy is the impact it can have on the assets you have acquired. For most people, their family home is the most important asset that they worry about losing in bankruptcy. For those who have substantial equity in their home, even if their income is currently low, Chapter 13 bankruptcy is usually a better option than Chapter 7.

Chapter 7 limits both your income and the assets you retain. Anything you own that does not receive an exemption is subject to liquidation or sale by the courts to pay your creditors. That could even include some of the equity you've built in your home.

Chapter 7 just one way to handle credit debt

Credit card debt is one of the most pervasive financial issues facing the American family today. With consumer debt topping $1 trillion this past year, not to mention the associated $104 billion in interest, debt is clearly a problem for some Kentucky residents. Thankfully, there are a variety of ways for a family struggling with debt to handle it -- from savings and repayment methods, to debt reconstruction, to Chapter 7 bankruptcy in the most challenging cases.

For people with multiple credit cards, the "snowball method" can be a good place to start paying back debts. This method involves paying off cards in order from smallest debt to largest, allowing for quick psychological "wins" that help people continue down that path. Contrarily, the "avalanche method" espouses paying off the card with the highest interest rate first, then using the extra money to pay down the next-highest, and so on.

Filing for Chapter 7

Filing for bankruptcy is one of the most important decisions an individual or family can make when struggling with insurmountable debt. However, for some Kentucky residents, the prospect of a Chapter 7 filing can be daunting considering the sometimes-complicated paperwork involved in the process. The support of an experienced bankruptcy attorney can mean the difference between a difficult and confusing journey and a straightforward track to healthier finances.

Chapter 7 bankruptcy involves the appointing of a trustee by the bankruptcy court to an individual's case. This trustee takes an accounting of all accrued assets and proceeds to liquidate nonexempt assets to pay down creditors. Unsecured debt like credit cards is typically discharged by the court. This differs from a Chapter 13 filing, which is essentially a 3 to 5 year repayment plan approved by the court for an individual or family to pay back debts without being hounded by collections agencies.

How Chapter 7 bankruptcy stands out

Filing for personal bankruptcy in the United States typically allows the average person two distinct options. Chapter 7 bankruptcy and Chapter 13 bankruptcy each have their own unique benefits and drawbacks, depending on the individual case. Kentucky residents considering filing for bankruptcy are encouraged to understand the difference between the two and, if necessary, to seek out support from an experienced attorney in determining the course of action that is best for them. 

A Chapter 7 bankruptcy filing is also known as "liquidation bankruptcy," as it involves the sale (or liquidation) of assets to pay down creditors. This is handled by a bankruptcy trustee appointed by the court. Once the filing is discharged, remaining unsecured debts are typically wiped out. This process takes roughly six months at maximum but requires the individual filing to pass a means test (comparing their income to the average income in their state) and to attend credit counseling. 

Explaining Chapter 7 bankruptcy

There are six major types of bankruptcy, but the most common is liquidation or straight bankruptcy. This is also known as Chapter 7, and some Kentucky residents understand it through negative connotations. However, it is important to understand what a Chapter 7 filing constitutes, and what it means for the future financial health of an individual or family. 

Simply put, a Chapter 7 bankruptcy is considered a liquidation bankruptcy because assets are sold off to pay down creditors. The process involves filing the forms and petition with a bankruptcy court local to the individual or family, and the assignation of a trustee who sells assets to pay down creditors who have filed claims against that individual or family. Inside of a few months, the process comes to an end, and the individual or family is released or discharged from their prior debts.

When debt collectors sue

If your creditors are suing you, it is a very serious situation indeed. You will need to take immediate action if you wish to stop the proceedings.

Most creditors only file lawsuits when a debt has gotten very delinquent or the debtor has made no attempts whatsoever to make payments. There is another reason they might sue you, and that is if the statute of limitations on the debt is about to run out.

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