Cash flow problems can lead to serious financial situations if they aren’t remedied right away. A job loss or large unplanned expense can wreak havoc on a family’s finances. Choosing to use credit cards for everyday expenses without the income to support the debt can also lead to a financial crisis. Fortunately, there are ways to resolve serious debt problems. However, it is important to first address the cause of the issue.
A credit counsellor may be able to help a person with serious debt set up a budget they can live within in order to get the bills under control. Budgeting is important because putting some money aside in a savings account can reduce the likelihood of serious cash flow problems related to job loss or unexpected expenses in the future. People who choose chapter 13 bankruptcy as a solution to their credit problems will need a savings account because they will not be able to use credit cards while making payments to the trustee. A chapter 13 bankruptcy lawyer might explain exactly how the process works.
With this type of debt relief, someone with more debts than assets can make a single payment every month they can afford. The court will look at the person’s assets and resources to determine how much money they can realistically pay every month. After making that payment, there is only enough money left over for vital living expenses like food and transportation. By completing the repayment plan, everyone who goes through bankruptcy learns how to budget their money. This skill will be very helpful in the future.
Over time, and with good financial advice from credit counsellors, someone who goes through bankruptcy can develop a good credit score and regains the ability to get credit at a reasonable rate. A chapter 13 bankruptcy lawyer might advise a client who wants to keep assets such as a house or a car to use this type of bankruptcy rather than chapter 7. To learn more about both types of bankruptcy protection, visit us and schedule a free consultation with an experienced attorney who understands the options available in debt reduction.
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