American Debt And Why Bankruptcy Is Not The Solution

Debt is a huge problem in today’s American Economy. This is an issue which has been known for many years, and has continually grown. Unfortunately, so many are unable or unwilling to take action to counteract this problem. Debt has become ingrained into our society as an acceptable item and lifestyle. As of 2016, 73% of consumers were reported to have had an average of $62,000 in debt at the time of death. Others who have tried to escape their debt problems have even tried to file for bankruptcy as a last chance to start over. Unfortunately, there are many debts which will NOT be eliminated with this option.

American Debt

With the current mindset the way it is towards debt, we will only continue to see the American consumer debt increase. It has become an acceptable part of our lives and it shouldn’t be. A study conducted from 2016 concluded approximately 73% of Americans were pronounced deceased with an average of $62,000 in debt. When you die, debt is no longer a concern of yours. However, have you ever wondered what happens to your debt when you die? Well, in most cases it will die with you. Though, is some cases any outstanding creditors may elect to go after your estate to collect a portion or all of the outstanding debt you may have left. This is more probable when there is a significant estate left, the state you live, and if there are multiple creditors outstanding. This means your remaining family will be left to deal with these creditors, probate, etc. All of this is a result of your choices you made in life.

Bankruptcy Option

Some Americans elect to rectify the issue of debt through the process of bankruptcy. This should NEVER be your BEST option to get rid of outstanding debt, there are plenty of other options. When you decide to proceed with bankruptcy you will have to make a case as to why you are filing. If accepted and approved you have the option to include debts within the settlement. Your outstanding creditors will be notified as to the settlement and will go away. However, the aftermath of having a bankruptcy can be much worse than just having the debt. Whatever credit score you may have had previously will now be dramatically less, especially if you had great credit before with many debts included in the filing. Thus, you will have a very difficult time getting approved for many things which will require checking your credit. On top of this, you will have a long road ahead of you to rebuild your credit.

Bankruptcy Myths

For many, bankruptcy is the first thought they come to when thinking about getting rid of lingering debts. Some of these include tax liability from back taxes, secured debts such as a car, and student loans. For many Americans student loan debt is one of the largest debt balances on their record. Although it would be great to eliminate this debt through bankruptcy, sadly, this is only possible under extreme circumstances. This would only be available after proof of a permanent inability to pay back the debt due to health or other income limitation circumstance. With regards to the secured debt, you would not be able to have it include in the bankruptcy AND keep the vehicle. Thus, if included you would have to forfeit the vehicle back to the lender.

How To Avoid These Dire Circumstances?

Although these are some grave descriptions of what could happen, understanding there are other options is the first step to avoiding these outcomes. There is actually one easy way to begin the process of fixing your own debt problem, protecting your family, and actually increasing your credit score. No, it is not a sales gimmick or new product. It is something we have discussed many times before. The item I am talking about is a budget. Yes, something as simple as having a good working budget to help you manage your money and begin paying off your debt will save you from all of these hardships.

How To Get Started

You have come to the right place. We have dedicated our entire blog to have articles upon articles of content to help you with your finances, budget, career, life, and family. After all, managing your finances is just part a bigger picture. Check out our other posts or search for a specific topic. If we don’t have it, let us know! We would be happy to dedicate a post directly to YOUR question.