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How much of your income should go to paying off your debt?
As you have probably noticed, virtually everything costs more now than just a couple of years ago. In fact, according to reporting from Time, inflation has kept the prices of everyday items at near record levels. If you do not have enough cash to pay for gas, utilities, groceries and clothing, you may have little choice but to use your credit cards.
Even if you try to stay on top of your finances, consumer debt can sneak up on you. Before you know it, you may not be able to pay even the minimum amounts due on your credit cards. So, how much of your income should you devote to paying off your consumer debt?
Your budget
Before knowing how much you can afford to pay credit card companies, you must come up with a budget. To do so, determine how much you spend each month on rent, utilities, food and other essential expenses. Then, see exactly how much you have left over.
Your ability to pay
Obviously, it usually makes sense to make at least the minimum payments to the issuers of your credit cards. If you only do that, though, it may take years for you to completely pay off your consumer debt. By budgeting, you may have enough remaining to make extra payments toward the principal debts you owe.
Can the wildcard exemption protect your car during bankruptcy?
If you are struggling to pay your bills, you certainly are not alone. In fact, according to Fox Business, half of American adults have had trouble paying credit card bills, medical debt, student loans or other outstanding balances during the past year.
Thankfully, Chapter 7 bankruptcy may give you a comparatively simple option for doing away with much of what you owe. If you take advantage of this type of bankruptcy, though, you must sell some of your assets to pay your creditors. This might mean getting rid of your car, truck or SUV.
Your need for reliable transportation
You obviously need access to reliable transportation for your commute to work and other places. Put differently, if you cannot drive, you may lose your job and incur even more debt. Regrettably, Maryland does not have a standalone automotive exemption in its bankruptcy laws. You may not be entirely out of luck, however.
Can you afford to help your adult children financially?
If you are a parent, you may have thought your financial obligation to your children would end when they became adults. Still, according to Prudential, roughly half of American adults say they are struggling financially. If your children are in this group, they may ask you for money or other financial support regularly.
While there is certainly nothing inherently wrong with helping your adult children from time to time, you do not want to overextend yourself. This is especially true if you have retired from your job, as you are likely living on a fixed income.
Many parents are sacrificing more nowadays
According to reporting from CNBC, 45% of parents say they have given money to their adult children during the last couple of years. Alarmingly, nearly 80% of these individuals had to make personal sacrifices to offer financial assistance to their kids. That is, most parents have had to scrimp to make their loans or gifts possible.
How long does filing a Chapter 13 bankruptcy take?
Bankruptcy is often a tool that may help you get out of a tricky situation. Your situation is unique, which means you need to understand which bankruptcy option fits your needs the most.
Chapter 13, as the United States Courts describes, is an option that offers you the opportunity to pay off your debts while still saving your home from foreclosure. Knowing what to expect over the coming months may help you organize your schedule and financial situation.
Mandatory credit counseling
Before your application for Chapter 13 bankruptcy, you must have a certificate of credit counseling. You earn these from courses approved by the Department of Justice U.S. Trustee Program. These courses advise you on how to manage your debt and help you draft a potential debt repayment plan.
Initial paperwork filing
With your certificate in hand, you need three schedules and a statement:
A few facts about bankruptcy and divorce
Most people know that divorce puts additional stress on a person's finances. This could lead to bankruptcy during an especially challenging time.
A few facts could help a person cope when faced with both marital and financial difficulties.
Handling both at the same time
Information from Experian emphasizes the difficulty of filing legal motions for divorce and bankruptcy simultaneously. Most court jurisdictions will place precedence over one action or the other, so for practical purposes, the two will not happen at the same time. Many courts will suspend the bankruptcy proceedings until the completion of the divorce.
This enables the courts to apportion the marital debts and assets to each party. Another practical consideration involves the sheer difficulty of undergoing two significant court cases during the same time period. This could lead to stress and impact relationships and work obligations.
How are Chapter 7 and Chapter 13 bankruptcies different?
Many people across Maryland struggle to stay on top of their finances, so if you find yourself facing similar circumstances, you are not alone. After considering your options, you may decide that filing for bankruptcy might give you your strongest chance of digging yourself out of debt. Most consumer bankruptcies involve either Chapter 7 or Chapter 13 filings.
According to U.S. News and World Report, the two common types of consumer bankruptcies differ in several key ways.
The Chapter 7 bankruptcy
A Chapter 7 filing may suit your needs if you have a relatively low household income and no realistic way to otherwise get back on top of your finances. You have to take a means test to qualify for Chapter 7. If you pass the test, you move forward with a "liquidation" bankruptcy. This means you may, depending on circumstances, have to sell off some of your property or assets to pay back creditors.
How the bankruptcy means test determines Chapter 7 eligibility
For many Maryland consumers, filing for bankruptcy means a chance at a fresh start. Though not necessarily appropriate in all situations, filing for bankruptcy may help you get a better grip on your finances so that you are able to avoid falling into deep debt again in the future. If you decide to file for bankruptcy, you are likely to do so through either a Chapter 7 or a Chapter 13 filing. However, if you wish to file for Chapter 7, you first have to prove eligibility to do so.
According to NerdWallet, you must take and pass a means test to move forward with filing for Chapter 7. The means test has two parts. However, if you pass the first part with ease, you do not need to worry about the second part.
The first part of the means test
The first step in the bankruptcy means test has you compare your own household income from the last six months against the median household income in Maryland. If yours is the lower amount, you automatically pass the means test and qualify for Chapter 7. If you do not pass the means test in its first section, you may move on to the second step.
What does debt collector harassment look like?
Dealing with debt collectors is not the most fun thing. It becomes even more harrowing when up against a debt collector who refuses to abide by the Fair Debt Collection Practices Act (FDCPA).
The ways in which a debt collector may avoid abiding by the FDCPA can differ in many ways. What does harassment in specific tend to look like?
Overt debt collector harassment
The Consumer Financial Protection Bureau takes a look at debt collector harassment. This is an umbrella of actions banned by the aforementioned FDCPA, though of course, not every debt collector will abide by the act.
Harassing acts fall under an umbrella definition that generally speaks of anything that causes the target to feel anxious, unsafe, afraid or other such negative feelings due to actions taken or words spoken by the debt collector.
This can include more overt threats, such as directly threatening a family with eviction if they do not repay their debts or even threatening someone within the household with bodily harm.
What is an "automatic stay"?
Getting behind on your bills can be incredibly stressful. Concerns about keeping your home, your car and your way of life can keep you up at night.
Creditors who constantly attempt to collect on bills you have no way to pay do not help lower your stress. One of the benefits of filing for bankruptcy is that creditors cannot continue to harass you.
What is an automatic stay?
A stay is a court order that forbids creditors from taking any action to collect on debts while the stay is in force, including foreclosure, garnishments, lawsuits or any other collection activity. When you file for bankruptcy, the court enters a stay automatically as part of the filing process, hence "automatic stay".
How long can an automatic stay be in effect?
In the state of Maryland, an automatic stay can last anywhere from 30 days to five years. Generally speaking, the stay lifts when the bankruptcy process is complete.
3 tips for building credit after filing bankruptcy
If you struggle to stay on top of your bills every month and feel like you will never get out of debt, bankruptcy may be a helpful option. There are two types of consumer bankruptcy, which include Chapter 7 and Chapter 13, and filing may help you move forward financially.
The Federal Trade Commission states that filing bankruptcy could help stop repossessions, foreclosures, utility shut-offs, wage garnishment and other debt-related activities. Although bankruptcy is helpful for many, it can damage your credit score, which is why you will want to take steps to rebuild your credit after filing.
1. Keep an eye on your credit score
Check your credit score and review your credit report on a monthly basis. While your bankruptcy filing will stay on your credit report for several years, you should still negate any errors or issues on your reports to ensure an accurate reflection of your creditworthiness.
2. Use debt carefully
You may feel hesitant to use debt after you finalize the bankruptcy process but doing so carefully can help you rebuild your credit. Try using a secured credit card or ask someone to co-sign on a loan application.
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