Debt Relief and Bankruptcy

The accumulation of debt is not something to be ashamed of. Individuals from all walks of life encounter circumstances that make personal finances difficult to manage. Most of these are outside of the control of the person holding the debt.

For example, an individual may be made redundant from their job, or have to take a period of leave due to an accident or medical condition. There might be unexpected repairs needed to their house or car. Prices of groceries, utilities, and everyday items can inflate. To compound the problem, interest rates may rise, making debt more expensive. Any of these factors will impact the ability of a person to continue to make debt repayments.

On their own, these events may cause significant financial strain. In combination, they can lead to debt spiralling out of control. Often, the stigma of debt prevents people from seeking help; they may be afraid of judgement, or simply confronting a reality that is uncomfortable. However, the only way to effectively deal with debt is to tackle it head-on, which can be difficult if an individual does not have expertise in this specific aspect of financial management. It is imperative, therefore, to enlist the support of specialists who have the knowledge and experience to guide you successfully towards a debt-free future.

What is bankruptcy?

There are several methods of resolving debt; one of the most well-known is bankruptcy. If someone has more than $1,000 in unpaid debt, and is determined to be unable to pay the remaining balance (also known as insolvency), it may be appropriate for them to consider bankruptcy. This allows a person to either liquidate their assets to pay their debt, or to create a repayment plan which is negotiated with their creditors. These can be quite complicated to arrange, so it is important to proceed under the guidance of experienced financial advisors.

There are two main types of bankruptcy. The first is known as a Chapter 7, which refers to its chapter in the US Bankruptcy Code. This method of bankruptcy involves the liquidation of a person’s assets, such as cash, stocks, bonds, other investments, heirlooms, valuable items and collections, second vehicles and second homes. Your primary residence is exempt from liquidation, as long as you are up to date with payments. If not, you may lose some of the equity of your home. Exempt items include any assets essential to your day-to-day life and employment, including one motor vehicle, reasonable clothing, furnishings, household goods, equipment for work, and jewelry (to a set value). Pensions are generally protected.

Chapter 13 bankruptcies involve the adjustment of debts and a payment plan of three to five years, which results in some or all of the debt being repaid. Proof of regular income and current assets, a comprehensive list of all debts, as well as regular living expenses, must be provided when the petition is made. The most favourable aspect of Chapter 13 bankruptcy is that it does not require liquidation of assets, and your home is protected from foreclosure.

Before proceeding with any kind of debt management plan, consult with an proficient specialist. For bankruptcy advice in Maui, speak to the experts at Cain and Herren. Click here to learn more.