A growing number of Georgia residents find themselves in financial trouble. In recent years, the national health crisis, job loss and medical costs have taken a toll. The government took various steps to help people shore up their finances and avoid getting into hefty debt.
However, as society has incrementally returned to normalcy, financial problems that were avoided are coming to light.
Early 2023 has seen a spike in bankruptcy filings. People need to be cognizant of how much they owe, what they earn and if it is reasonable to keep up with the payments or bankruptcy might be a worthwhile consideration. It is important to have advice when deciding whether it is the right path to take.
Bankruptcy filings are up substantially in 2023
Statistics show that there was a 20% increase in bankruptcy filings in January 2023 when compared to the prior year. This included personal bankruptcy and business bankruptcy. The financial challenges of the loss of government assistance along with job loss and bank failures has contributed to the problem as the year has progressed.
This is expected to continue and perhaps get worse as the scope of the financial challenges comes clearer.
Chapter 7 or Chapter 13
It is important for debtors to be fully aware of the personal bankruptcy chapters and how they suit their needs. Chapter 7 is referred to as a liquidation bankruptcy where a person’s assets are assessed to determine their value and may be surrendered to be sold to pay back creditors.
Still, most people who decide to file for Chapter 7 do not have major assets like a home or newer automobile, so they do not need to surrender much, if anything. Chapter 7 clears unsecured debt like medical expenses and credit card debt. It can be completed in a relatively short time and the debts will be discharged. There is a means test to calculate whether the person qualifies.
Chapter 13 is for people who own property they want to keep. For example, a homeowner who has fallen behind on their payments and is facing foreclosure could retain the property after filing for Chapter 13. It is a repayment plan that lasts for three or five years.
With Chapter 13, payments will be made to the trustee who will subsequently distribute a certain amount to creditors. Once the payments are completed, the debts are discharged. The amount paid per month is based on income and it will generally reduce the payments they are making when compared to what they paid before they chose to file. This covers secured debt like the home and unsecured debt.
There is no reason to fear bankruptcy with the proper guidance
People frequently pause and find reasons not to file for Chapter 7 or Chapter 13 bankruptcy. While it is understandable, their reluctance is based on an emotional response and fear instead of fact. Bankruptcy is an effective strategy to clear overwhelming debt and to create a viable payment plan to get into a far better financial situation.
There might be a certain level of embarrassment for overextending themselves on their credit and losing their job. This is a common mistake that should not dissuade people from seeking options. Many have purchased a home, made investments or had personal challenges that have led to financial turmoil. Bankruptcy is in place to give them a way to clear their debt.