How Poor Spending Got You Here
Do you ever look at your budget and just don’t understand how it reached this point? Bills are piling up all around you, and there is just no way they’re all going to be paid off. You have so many, you can’t even figure out what is due (and when) anymore. You swipe your credit card at the grocery store and fear it will be rejected.
These are telltale signs of someone that has allowed their budget to get out of control. It usually starts off honest enough — a missed credit card payment here or spending outside your budget there to get that car you’ve always wanted — but it eventually snowballs. Eventually, it snowballs to financial ruin.
Poor budgeting and spending is one of the leading causes of bankruptcy in the United States. Many of us are hardworking people, but budgeting isn’t easy. Even when we think we have everything organized how we want it, there is frequently something that gets in the way. Life is difficult to predict.
Unfortunately, life can also be rather unforgiving. Small mistakes are not forgiven very easily. There are consequences for every action, and when you can’t afford to pay for something, that consequence is usually debt.
As debt from poor spending habits builds up, it eventually reaches the situation listed above, where it feels that there is no possible way to escape from that debt. When you are in this situation, you may look to seek bankruptcy as an escape.
Bankruptcy May Be Your Second Chance
Life does not give second chances, and as a result, we’ve had to build them into our systems that we have created. One of the largest myths of bankruptcy is that it is an end to someone’s life. All of your possessions are taken away from you, and you are kicked to curb with nothing but what’s in your pocket to survive on. This is not true. In reality, bankruptcy is an opportunity to see your debts erased.
When you file for bankruptcy, you will have this happen:
- Freed from debts
- An opportunity to start over
- No more financial strife
This doesn’t mean that life is going to be easy and you will suffer no problems at all. Your life will still see many of the same challenges that you were facing before, but you will no longer have debts hanging over your head and controlling every decision in your life.
This, of course, doesn’t come without consequences. When you go into bankruptcy, there are going to be costs. What these costs are will largely depend on what kind of bankruptcy you had to file for.
Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcy, then that typically means you have too much debt to possibly pay off in a reasonable amount of time. This is the most common form of bankruptcy and is where a lot of the misconceptions about bankruptcy come from.
When you file for Chapter 7 bankruptcy, your assets will be liquidated so you can pay off the debts to your name. This usually results in losing items such as:
- Extra houses
- Extra cars
- Valuable property
You won’t lose everything, however. Some of the things you keep when you are going through bankruptcy include:
- The equity in your home up to about $25,150 per person filing
- Tools of the debtor’s trade or profession, up to a certain value
- Motor vehicles, up to a certain value
- Reasonably necessary clothing
- Necessary household goods and furnishings
- Household appliances
- Jewelry, up to a certain value
- Home equity (a portion)
- Public benefits, including public assistance (welfare) and Social Security
Once your assets have been liquidized and you have finished the bankruptcy process, you will earn the opportunity to start over — no debts to your name and a chance to budget more properly.
Chapter 13 Bankruptcy
When filing for bankruptcy due to poor spending, you sometimes just need to have your finances restructured. When filing for Chapter 13 bankruptcy, you are given the opportunity to actually pay off all of your debts.
Your debt will be rolled into a lump sum and then you can pay it off in lump sum payments. This option helps you keep your possessions in the bankruptcy process, but you need to qualify for Chapter 13.
To qualify for Chapter 13, a debtor must have Total Debts of less than $2.75M.
At Blake Goodman, PC, Attorney, we will be able to look at your financial situation and help you decide if you qualify for Chapter 13 bankruptcy, Chapter 7 bankruptcy, or if you need bankruptcy at all. Schedule a consultation and we will discuss your situation together. The first consultation is FREE.