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Personal bankruptcy could help prevent student loan defaults

A college education is often the key to unlocking a fulfilling and financially rewarding career. However, a college degree is not cheap, and students in Connecticut and across the rest of the United States often struggle with paying back hefty loans. As experts predict high future rates of default, personal bankruptcy could be a smart option for some borrowers.

By the year 2023, as many as 40 percent of student loan borrowers might end up defaulting on their student loans. This prediction comes from the Brookings Institution, which also found that 250,000 people default every quarter. However, it is not necessarily those with tens of thousands of dollars in student loan debt who are struggling the most, as 32 percent of people with balances less than $5,000 defaulted once or more in the last four years. Only 15 percent of borrowers with $35,000 or more in loans defaulted.

Which generation is most likely to need personal bankruptcy?

Which generation holds the most debt? While some people in Connecticut may think they have the answer, the reality of debt in America may be surprising to most. Generation X currently leads the list. However, debt is not isolated to this demographic alone, and virtually anyone of any age could find themselves in need of debt relief through personal bankruptcy.

A study from Ramsey Solutions found that 72 percent of consumers in the United States have at least one form of debt. Of the 66 percent of individuals who have consumer debt, the per person average comes out to about $34,055. For many consumers, credit card debt appears to be particularly problematic.

What happens during a foreclosure?

Buying a home is a momentous achievement for which many people in Connecticut strive. Upon reaching the level of home ownership, few people ever expect to leave their homes. Unfortunately, financial troubles can complicate even the best-laid plans. Foreclosure is a legal tool that mortgage holders can use to kick out property owners who are behind on their payments, and to subsequently sell the property to recover financial losses.

When foreclosure was initially put into law, any default on a mortgage automatically caused ownership of the property to fall back to the mortgage holder. Now, borrowers have better opportunities to stay in their homes. The law generally requires that lenders give borrowers the opportunity to catch up on payments before losing their property. An understanding of how foreclosure works can be helpful to those who are seeking ways to avoid the process and catch up on payments.

Can I file for Chapter 7 bankruptcy?

Discharging debt through bankruptcy is extremely appealing for those who are currently unable to make ends meet. While this is possible through both Chapter 7 and Chapter 13 bankruptcies, most people find the first option more appealing as the latter first requires careful adherence to a repayment plan for a period of three to five years. However, not everyone qualifies for Chapter 7 bankruptcy. 

Individuals must pass the means test to qualify for Chapter 7. To pass the means test, a person's income for the six months before filing must fall below Connecticut's median income. Income includes more than what a person might earn in a paycheck, too. Tips, investment dividends, child or spousal support, unemployment, pensions, workers' comp, disability insurance, gross income from businesses, annuity payments and more all qualify as income. Those who fall below the median income can proceed with a Chapter 7 filing. 

Are student loans contributing to personal bankruptcy?

Getting a college education is perhaps one of the best ways to obtain a satisfying and well-paying job in Connecticut. Unfortunately, the cost of getting that education is firmly out of reach for most people. While student loans bridge the gap between university tuitions and what students can afford, they are also pushing many toward personal bankruptcy. 

Currently, over 44 million people carry about $1.5 trillion worth of student loan debt. This makes student loans second only to mortgages in terms of consumer debt. While trillions of dollars spread across millions of borrowers might not seem like that much, consider this -- the average 2016 college graduate left school with $37,000 in loans. In 2017, grads carried $40,000 with them at graduation. 

Study reveals how cancer patients feel about personal bankruptcy

While some financial challenges are avoidable with budgeting and planning, others are a bit more difficult to prevent. Medical debt is a major concern for many people in Connecticut and across the United States. A new study has revealed interesting information on the relationship between cancer treatments and personal bankruptcy.

The study, conducted in part by Duke University Medical Center, surveyed patients to understand the extent of financial strain they would take on to access treatments. According to their results, almost 50 percent of patients would declare bankruptcy if it meant access to treatment. Over one third said they would sell their home, while at least 65 percent would cut down on personal costs like living expenses and vacations to pay for treatment.

What are the first debt management steps people can take?

Facing debt from multiple sources can be overwhelming. Some Connecticut borrowers are able to get a handle on their amounts owed with some simple debt management planning and cutting back. For others, the debt load is much heavier and can require more action, up to and including bankruptcy. Here are some of the first steps people should take to manage their debt, whether it is large or small.

The first important step to take is coming to terms with the reality of amounts owed. Often, this means making a list of different loans as well as income sources. This can help someone understand if it is feasible to pay the amounts back, or if he or she is in over his or her head.

Why do people file for personal bankruptcy?

Debt is not an uncommon problem for people across the United States. Collectively, Americans hold $1.5 trillion in student loan debt alone. The weight of this combined with other household debt and bills can be overwhelming for some Connecticut families. In some cases, personal bankruptcy may be the best option. 

Medical debt is one of the more common reasons people choose to file for bankruptcy, as it can involve very overwhelming bills within a short period of time. Combined with student loan debt, this can push someone past what they are able to pay. Another common reason is the loss of a job or the inability to find work. A combination of two of these factors or all three may make bankruptcy a necessary step.

Should someone buy a car during Chapter 7 bankruptcy>

One of the biggest questions people have about bankruptcy is how it might affect their future ability to purchase items, particularly on credit. One of the specific issues Connecticut filers may wonder about is their ability to buy a car during Chapter 7 bankruptcy. The answer to this question is not always straightforward, as there is a difference between being able to buy a car and it being a good idea.

The Chapter 7 bankruptcy process typically lasts three to six months. During this process, filers must list their assets for the courts. Nonexempt assets must be sold under this type of bankruptcy, with proceeds going to creditors. A vehicle may be exempt from this provided it falls under the vehicle exemption amount set out under Connecticut law.

Pros and cons of debt management plans

When people visit a professional to discuss financial issues, they are usually hoping to come out with some enhanced knowledge and and an awareness of the next steps to tackle their challenges. A debt management plan is a common way that professionals will work to address manageable debt for Connecticut clients. Here are a few things people should know about these plans in order to decide if this is the best path to take in their situation.

Many people mistake debt management plans for debt settlement. Debt settlement is a process typically led by a legal professional where people are able to reduce the amount they owe. This is usually the best option for people who have more debt than they can reasonably manage. Those who choose a debt management plan will have to pay back all of what they owe, with the only reduction being reduced fees or interest from a lender involved in drafting the plan.

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