What Is Debt Management And How You Can Get Rid Of It?

Debt management is a magnificent process to get your debt under control through monetary planning and budgeting. The main purpose of debt management plan is to use some vital strategies that can help you lower your present debt and move forward decreasing it gradually.

Why Debt Management is Important?

Debt management is a professional way to keep up with your financial bills, especially if they have seemingly gotten out of control. Of course, there are several strategies and way up to manage your debt. Implementing the Debt Snowball method or working a credit counseling organization would be the great way to control them. You can also create a Debt Management plan that fits in with your particular budget and financial situation.

People who are experiencing different problems in regards to the debt management plan can go through the credit counseling process. However, the overall mentioned strategies have some advantages and disadvantages too.

How the Process Works?

While debt management plans are quite important in our day to day life, but these are meant to address unsecured debts like credit cards and personal loans. It basically happens in one of two ways. These plans help you to eliminate your current debts.

DIY Debt Management Option:

This is the first option that you can use while facing problems. In this opportunity, you can create a suitable budget for yourself and that will allow you to repay off your debts and it also maintain your financial consistency. As the above mentioned, the Snowball method is a DIY version of the debt management.

At the same time, you can use budget calculator, financial management apps, and repayment calculator that can help you to keep you on a proper tack. You can also discuss with your creditors rather negotiate with them and try and decrease your monthly payments to lower your debt. It is for sure, once you have gotten the debt under control, you can decide whether you want to close your account or keep the same.

Credit Counselor Option:

The second option of the debt management plan is to go through the credit counseling. In that case, you need to find a professional credit counselor in your location. Please make sure that expert should have the certification in this profession. There are several non-profit and for-profit credit counselors available in market. Before hiring a personnel, you need to review his/her way of work, fees they would charge from you and their professionalism.

Functionalities of a Credit Counselor:

Only a professional credit counselor knows all the tricks to help you in this case. He/she must help you and prepare with a financial plan to repay your debts. They apply different strategies that can help you to negotiate with your creditors about the payment policies. These strategies help you to decrease the amount of your debts as well. At the same time, depending on your financial status, the personnel may close your account to get out of the situation. There are various tricks they apply to come out of the situation.

Debt Management- is it Right for You?

There is no doubt, the debt management is right for you. It is a helpful way to release your debt and make your life easier for you. However, there are some restrictions too. Debt management does not address secured debts like mortgages. There is another important point that it does not stop your bills from coming. To prepare a successful plan, you will need to have satisfactory earning to cover your existing bills as well.

Whereas, a debt counselor may be able to negotiate a minimum monthly plan for you but you have to pay the bills on a regular basis. You need to make sure that you can’t miss the bill. This is a regular process and if you miss one step, it will leave you back at square one with your debt.

“When we ask clients about their goals, getting out of debt is sometimes not even something that they’ve ever considered a possibility. It’s definitely possible,” says Katie Bossler, a quality assurance specialist at GreenPath Financial Wellness, a nonprofit credit counseling agency with branches throughout the country.

Debt Management- Does it affect your credit score?

On a friendly note, it can affect your Credit Score, if you do not repay the payment on a regular basis. Debt management plan is a professional tool or way to get rid of this problem and keep your debt under control. There are many ways to make sure your debt management plan is secure and protect you from unwanted hazards.

Missed the Payment:

If you missed the payment, it will have serious effect on your payment history. It will also cause your credit score down significantly which is not good at all. At the same time, if you and your counselor are implementing an option of withholding the payment, your credit score may go down.

Personal Loans:

Personal loans can help you and give you a chance to receive a lump-sum of money that can pay off your debt all at once. Undoubtedly, a personal loan is a quite good option if you know that you will need more time to get your debt under control. The loan will offer a repayment option that ranges from two to seven years.

Final Thoughts:

Each individual’s financial situation is different. However, only a professional debt management plant can help you to keep your life debt free, risk free.

The Negative Impact of Debt on Physical and Mental Health: Here’s the Help

Debt is something that we all have in our life. We live in a debt-ridden nation. The student loan debt has doubled over the years. Every household has credit card debt. More than a third of Americans haven’t paid their bills. They are afraid of collection agencies.

The PEW research revealed that more than 14 million people in the United States had lost their employment during the pandemic.

The unemployment rate increased dramatically from under 4% in February 2020 to 14.4% in April 2020.

In comparison, after the Great Recession of 2008, unemployment barely rose to 10.6%.

As a result, many people struggled to pay their bills, including medical bills, primarily if their work-provided health insurance was no longer available.

But how awful can it be for you? Regardless of who you are or why you owe money, being in debt can harm your physical and mental health.

The connection between financial wellbeing and our overall health

There is a connection between financial well-being and emotional distress. Debt incurred out of necessity, rather than for property investments, is very stressful. Many families have been compelled to raise their borrowing due to the COVID-19 pandemic’s financial consequences. Due to their debt obligations, many people skip medical care, rent payments and change their purchasing behavior. There is evidence that when a person’s debt load lowers, so do their depression symptoms.

Debt and a lack of control is causing helplessness and depression

Debt has been linked to feelings of unhappiness, worry, and even suicidal ideation.

While not everyone in debt has diagnosable worry, it is vital to seek assistance if needed.

Another dreadful aspect is the feeling of powerlessness in the face of it.

As we’ve seen during the pandemic, many people have discovered that they have little control over their life and finances are distressing.

How does debt affect your physical and mental health?

People who are in debt and struggle to pay their expenses are under a lot of stress, which manifests itself in various ways. These can include insomnia, constant anxiety, and a lack of focus. Doctors have admitted that it may be a lot worse than you believe. When you’re constantly worrying about bills, creditors, and whether you’ll be able to pay rent, it takes a toll on your self-esteem and cognitive performance. You often make rash decisions that can lead to even more financial difficulties. It’s a vicious cycle that may wreak havoc on your physical and mental well-being. Here’s how.

Debt load can create anxiety issues

Debt has a significant influence on your psychological health. You get a sensation of being underwater and unable to escape. If this feeling lasts for a long time, it inflicts massive damage to your health.

It can elevate your blood pressure.

According to a Northwestern University study, people age 24 to 32 unable to pay off their debts developed heart diseases.

They are suffering from higher blood pressure, which can cause a stroke. This shows how vital debt is as a health issue in our society.

You can experience sleep deprivation

Insomnia, or the difficulty to fall asleep, is a common symptom of overwhelming debt.

When you continually worry about money, it might be challenging to get a decent night’s sleep.

Worry, stress, anxiety and sadness can trigger insomnia. Sleep deprivation may increase your risk of heart disease, high blood pressure, stroke, and diabetes.

It can weaken your immune system

Chronic stress from financial worries might lead to a compromised immune system.

It can weaken your immune system, making you more susceptible to colds, viruses, and infections.

It increases pains and aches

Long-term stress and worry about debt can result in bodily symptoms such as migraines, stiff muscles, and back discomfort.

People who were in a lot of debt experienced a lot of headaches and migraines, according to studies.

You can experience stress in relationships

Your lifestyle suffers because of heavy debts. You’re also stressed out since you have to worry about making payments on your bills all the time.

This makes you irritable, and it impacts your health and your relationships with family members. Increasing debt has been linked to emotional anguish, sadness, rage, and even suicide. When you’re under a lot of stress, you’re more likely to become angry and create an uncomfortable situation for your loved ones. It has the potential to have profound health implications that will affect you for many years to come.

Is it possible to get back to your normal health?

The most challenging part of dealing with these mental health problems is resisting the urge to do nothing. It’s easy to bury your head in the sand when you’re burdened with debt. But it is possible for you to get back to your normal physical and mental health. You just need to take action to overcome the debt-related stress in life.

It is never too late to get out of debt, even if you feel there’s no way out. But that is never the case. Getting out of debt is possible. Discovering ways to get out of debt is the most effective treatment for curing your debt-related mental health issues. Taking action and small wins can help you regain your optimism. Asking for help and admitting you have a problem isn’t easy. But you must respond quickly and seek help to break the debt stress.

Steps to get out of debt to get back healthy financial life

To improve your mental health, you don’t have to pay off all your debts immediately.

You can start your debt-free journey by taking a few simple steps. What’s the best way to get started? Here you go:

You are not alone in this debt journey

Remember, you aren’t the only one who feels this way. The first thing to do if your debt stresses you out, whether it’s credit card debt, student loan debt, your mortgage payment, or whatever the issue is — is to take a step back and take a deep breath and realize you don’t have to go through this alone. You can get help out there. Also, many people outside are coping with debt and emotional trouble. It will help if you change your mindset regarding debt. Accept that debt is not a demon. You can fight back. So, find help and try to get out of it.

Organize your debt

You probably have no idea how much debt you have when you’re drowning in anxiety.

Get a clear picture of your debt accounts, including how much you owe and the minimum payments you must make.

Create a budget and stick to it

Any debt repayment strategy must include a budget. You are in control of your finances when you follow a budget. It gives you a sense of knowledge about your money. You can understand where your money is going and how much money you need to achieve a goal. You can have a sense of control over your finances and aspirations, which gives you a sense of liberation.

Set achievable goals

Don’t set ambitions you won’t be able to achieve. If you can’t control your shopping addiction, then don’t try hard. Set an amount and spend it. Also, don’t think you will repay your largest credit card in three months. Instead, target the smallest debt and pay it off first.

Share your feelings

Having someone to hold you accountable will help you get out of debt faster.

Talking to your loved ones about your debt and your aspirations can help you overcome the stigma.

Consolidate your debt

If you have credit card debt, you can consolidate them. Try to take out a consolidation loan at a low interest rate to pay off all the unsecured debts. You can also hire individuals to do the negotiations for you, as long as you check their references and evaluate them first.

Get assistance from an expert

Professional assistance can help you in getting out of debt. A debt counselor can help you find the tools and resources you need to succeed. You can start with free debt relief consultation. You will know which debt repayment method is best for you.

When you use these methods, you’ll notice that your mental health improves gradually.

Following a realistic debt payoff plan can help you reach a good position for the future.

Once you pay off debt, you will feel good about yourself because you’ve made significant progress.

What should you do if you don’t want to do anything?

From time to time, we all experience low moods. It’s easy to feel stuck if you’re feeling this way as if you can’t modify or improve your position. Being able to recognize when you’re depressed and how it could affect your financial decisions is a valuable skill in and of itself.

If you’re constantly feeling down and it’s starting to disrupt your daily life, you should consult your doctor.

When it comes to money, the sooner you start addressing the issue, the easier it will be to regain control.

However, finding the strength to deal with financial concerns can appear impossible at times for some people.

How can you assist someone with financial management?

If you know someone in mental agony due to financial issues, you should help the person.

The person can be a friend or a family member.

You’ll be able to identify changes in behavior, sometimes even before the problem occurs, that may serve as warning signs. You may establish an action plan together, such as looking after the credit card or bill payments when the person is sick or assisting in scheduling a doctor’s appointment.


Many consumers’ spending is expanding exponentially, even while incomes stay stagnant for some and credit and borrowing become more accessible.

This has created a perfect storm in many people’s lives, and there looks to be significant emotional damage.

The financial devastation caused by the global pandemic in 2020 has only added to this.

If debt is the primary cause of your bad physical and mental health, the best course is to change your financial habits. If you consistently skip bill payments, ignore collection calls, or cannot set aside funds for unexpected needs, it’s time to reconsider your strategy. Don’t put a strain on your mind and body. Avoid living paycheck to paycheck and start saving for retirement.

However, more emphasis should be paid to the psychological toll of unsecured debt and how it impacts one’s function and society as a whole.

10 Money Management Tricks To Be Debt Free And Save Money

The understanding of money management is important for everyone. It’s not always true that only business owners should learn money management. It is equally important for people who live paycheck to paycheck. If you’re not good with money, then you may accumulate a large amount of debt. And debt is not good for your personal financial health. You can’t be able to manage mandatory living cost. Moreover, you will not be able to save money for your financial future.

But, the question is how can you manage your money to avoid debt and save for the future?

At first, take a look at the ways in which you can pay off your existing debts.

Analyze how much debt you are in and take action accordingly

You have to analyze your debts so that you can take the proper action to get rid of them. If you’re not sure how to fight with your current debts, then take help from an expert or try to gain more knowledge on debt repayment. To avoid further debts, you must maintain a track of the due dates on the various loans, the interest rates and the principal amount owed. This way you can be sure of the outstanding amount. It can be easier for you to become debt free fast.

Choose the right debt repayment strategy to get out of debt

To get out of debt, you have to pick the right debt repayment option. There are many debt repayment options available. You can become debt free on your own or you can take professional help. No matter what option you choose, you need to stick to the strategy to get out of debt as soon as possible.

Debt repayment strategies that you can manage on your own

At first, I would like to introduce you with some do-it-yourself debt repayment strategy that you can manage on your own.

  • Debt snowball method

You can follow the debt snowball method to pay off your multiple credit card debts easily. Let me explain the debt snowball method first.

In the debt snowball method, you need to arrange all your debts from smallest to largest order. After that, you need to make larger payments to the smallest debt while making minimum payments to the rest of the debts.

After paying off the smallest debt, you have to target the second smallest debt. Make sure you pay the minimum to the other debts while paying larger to the target debt. Follow the method until all the debts get paid off.

  • Debt avalanche method

If your income is good, then you can follow the debt avalanche method to get out of debt. In debt avalanche method, you need to target the highest interest rate debt first. Start making larger payments to the highest interest rate debt while paying the minimum to the rest of the debts. Once the highest one is paid off, target the second highest interest rate debt. Follow the same method until all the debts are paid off.

  • Take out a consolidation loan

If you can’t understand the debt snowball or debt avalanche method, then you can consolidate your debt. Take out a consolidation loan to pay off all your debts. However, you have to pay off the new consolidation loan on time. Don’t forget to make the monthly payments on your new loan.

Professional debt repayment strategies that you can consider to pay off debts

You can also seek professional debt relief help to be a debt-free person. However, for that, you need to choose an authentic company who gives debt relief services.

  • Seek debt counseling session

If you are not sure where to start, you can also consider credit /debt counseling session to get an idea of proper debt relief option. The debt counselor will also help you to understand better money management tricks.

  • Debt consolidation program

Once you enroll in a debt consolidation program, the company will contact your creditors to negotiate to reduce the interest rate of your debts. Your multiple debts payments will be merged into one single monthly payments.

  • Debt settlement program

If you are unable to pay off the whole debt, then debt settlement can be the good option for you. In debt settlement, your total debt amount will be reduced. The company will negotiate with your creditors to reduce the total debt.

Note: Paying off debts is not enough, you have to stay away from future debts. To do so, you have to learn some money management tricks. It will help you to save money as well.

Here you go:

Start following a budget

To avoid further debts and to save money, you need to assess your present financial situation. Take a pen and paper and write down your monthly expenses. Look through and evaluate your bank statements, credit card bills, household cost, and other unsecured bills so that you can find out the total amount you have to pay every month. It will help you to pay off your monthly obligations on time and to avoid further debts.

Think twice and judge each spending

Before each purchase, think whether or not the item is your need. It is important to spend money on need instead of wants. Thus, you’ll be able to stay away from debts in the near future. Since the monthly expenses can expand over a huge variety of items, it is quite natural that you may spend impulsively on items that are not necessary for you to buy. Thus, you should cut down on luxury and unnecessary items to curb these expenses.

Reduce the usage of credit cards

Remember, using multiple credit cards is not enough, you have to pay the bills in full and within the stipulated time. If you don’t pay the bills is full, you will start accumulating interest rate. One day you will fall into the vicious cycle of debt. So, you should use your credit cards very carefully. Use a credit card only when you can afford the cost. Use it and pay the bill within the time. Use cash as much as possible to avoid accumulating credit card bills.

Curb unnecessary expenses

To pay off debts and to avoid further debts, you have to cut down unnecessary expenses. Remember, you have to make all your monthly payments on time. To do so, you need to have enough money in hand. If you spend all the money once you get the paycheck in hand, you can’t make payments on your monthly obligations. So, revisit your budget to cut down on the extra cost to that you can free up some money. Having enough money not only helps to make monthly payments but also helps to secure your financial future.

Set up an emergency fund

Creating an emergency fund is necessary to avoid further debts. Emergencies are uncertain; they can come at any time. So, you have to be prepared for that. If you don’t have enough money in an emergency fund, then you have to swipe your credit card or take out a payday loan to manage the situation, which is a wrong practice. Once you have enough money in an emergency fund, you can easily use that to get out of the situation without inviting debts in life.

Note: Save at least 3-6 months of savings in an emergency fund to avoid surprising debts in your life.

Automate your savings

Many baby boomers are in debt due to lack of savings. They are unable to enjoy their retirement due to the debt burden. You have to save enough money to secure your financial future. Otherwise, you may have to lengthen your working life. If you want to retire at the right age, start savings today. Set aside at least 20% of your monthly income. Also, open a retirement account to save money for your retirement, so that you can avoid debt in your golden age. Automate your savings to avoid losing money on unnecessary things. You can set up automatic savings with the help of your bank where you have a savings account.

Reward yourself

Living within your means plays a big role in managing money. But it doesn’t mean you have to deprive yourself. You can still spend money on the thing that you want after paying your monthly obligations. You just need to plan your money properly. Set aside a portion of your income every month for guilt-free spending. Reward yourself; it helps to stay focused on your money management goal.

Note: You can open a bank account where you can save money for planning a vacation, enjoying the New Year party, and purchasing a big ticket item.

Lastly, the main thing that you always remember is, pay bills on time. It will help you to avoid debt and save money. Another thing is, due to the lack of proper insurance coverage, many people often lose money. So, you must safeguard your money by taking proper insurances coverage. I hope these money management tips help you to avoid debt and save money.

Ways to Get Out of Debts

Panic-stricken faces, reluctance to spend even on essential commodities, high stress, and pressure levels, getting annoyed even at the slightest chance are not just signs of depression but also of a person in deep debts. Well, the way out of it very simple pay them all.

The happiness of a person paying the last installment of his loan is equivalent to that of a person who has become a father. You feel your shoulders light and mind stress-free. Imagine what will be your state of mind when you have to get into another loan to manage an urgent need? This will be a nightmare and depressing experience. So if I tell you that, there is a way to get out of debts and continue to be the same for the rest of your life, won’t you be related?

Here are five ways to get out of debts

1. Plan your savings

I start with the most shout after and preferred solution to get out of debts, savings plans. Well, this is the easiest way to get out of debts. Using your money from savings to spend on life events and emergencies instead of taking a chunk from your monthly paycheque. There are a lot of short term and long term investment plans available for you to scrutinize and embark on. Once you decide on the plan, decide on the savings and then proceed to save it on a monthly basis.

Discipline is very important when you start your savings plan, no matter what the amount allocated for the savings should not be used for any other purposes. The amount saved should be used only for your goal when you can save from those savings to start the cycle again to earn better monetary benefits.

2. Record your mistakes

Nobody likes to time travel to visit the mistakes made in life. But I am not going to ask you to time travel but create a documentary about various financial mistakes you have made or make an entry into your diary whenever you make a mistake. This will help you in two ways:

1. It will protect you from committing the same mistake twice.

2. It can also be used to bail you out of precarious situations simply to help you in finding a way to get out of debt troubles.

3. Secondary income

The best way to increase your cash flow and to save more money is to create a source of secondary income. Choose your secondary income source based on your passion. For example, if you are passionate about writing, then you can choose content development, article writing as a secondary profession. Writing can be done from home and it will also quench your passion. It will also help you as a stress buster and when money starts to come in from the secondary income you can breathe a lot easier than you were before.

When you choose a secondary income source, make sure it is not stressful and laborious. You already have your primary job to get stressed and overwork. So take a lot of care when you choose your secondary income source.

4. Invest your way to the top

A business needs assets to increase its valuation similarly a person needs investments to increase his standard of living. Right investment at the right time in the right place will yield you right results. The easiest way out of debts is to climb the ladder of investments. Plan your investment mix correctly. Investments to aid you during your retirements should be the first and foremost investment you make.

DCA provides a lot of investments, 529 plan which is tax-free can also be chosen to make investments. These may come to your aid when you need them to.

5. Battle against boredom

A study says people tend to spend more when you are bored. The best way to put it is

“An ideal mind is a devil’s workshop”

It is always better to keep yourself engaged in some activities. When can you be active by paying the least amount of fees why not? You tend to splurge money when you a bored and you start to purchase something to kill time. For example, you may decide to purchase Xbox to kill time until your girl returns from work. Instead, you can choose activities like jogging, badminton which are comparatively cheap to kill your time. You can enjoy the twin benefits of fitness and stress relief.

Summing up:

To live with or without a debt is in your hands. It is always better to live a life without any financial burden. This is life without a financial burden is not impossible but is possible with little planning and wise decisions. Decisions for a lifetime after all we are not going to be working all our lives when we decide to hang our boots make sure you hang it with pride and without any regrets.

Things You Should Know About Debt Management

Have you ever wondered how you get into debts?

Debt is something which, none of us would want to entertain in our lives. But sooner or later, we do get into debts and sometimes it takes years to clear it off. We all think that we have control over our money, but the fact is our mind is manipulated every moment towards spending money. Before you even realize it, you would have spent it on something unwanted. And the debts get added. If you follow a proper debt management plan, you will not only be able to clear your debts plus you will know to avoid getting into debts.

What is debt management?

First of all, you need to know what debt management is and how it can help you. List down the debts based on the interest rates. Start clearing off the ones with higher interest rates. If you find it difficult to clear off debts with the existing financial situation then you can look for debt management plans. There are various companies that offer debt management plans and you can choose based on your needs. The first essential thing to do is not falling into further new debts until you clear all the existing debts.

There are quite a few things that you need to know before you can plan on debt management.

The marketing strategy:

A research says that the turnover of media advertising industry was 207 billion U.S dollars in 2017, which is the result of you and other customers who fall as prey of the marketing strategy.

People in the fields of marketing, sales or advertising know it better to make you spend your money on the things which you might not need even. Call it the marketing strategy or your hopping mind which gets tempted to buy things – everything adds up to debts and tons of debts!

Installments add up to become debts!

You do all the research for a home, and finally found your dream home- a place of your choice with all the things as you wished, but wait the cost of it is beyond your affordable limit. The cloud of disappointment surrounds you, and then a friendly salesperson comes and shows the path. He explains how the huge amount can be broken into small monthly installments to be paid in a few years and it won’t pinch your budget as well. You might just notice the short-cut that leads to your dream home and not the debt that is going to be with you till you retire or maybe longer. Meanwhile, you need to look for a way to save for retirement as well. A house or property out of your affordable limit will leave you with debts for a lifetime and make it difficult to plan your savings.

By knowing the debt management technique, you will be able to organize your finances well. You can avoid such scenarios by fixing a workable budget before you look for a house. This will also help you to evaluate your debts, clear it off and how you can progress towards a savings plan.

The comparison trap!

Why can’t I go for nice cars, big home etc. which other people have?

I can easily get those by paying small monthly installments over a period of months and years. But, what about savings? Others would have saved for it and bought, you might not know the details.

Don’t fall into the trap of comparing with others and end up buying something which you might regret for years. Paying 4 to 5 small installments every month can seem like a burden in the long run. Especially, when there is a financial emergency, you are all stuck in debts and left with no money.

The savings strategy:

If you still want to buy things out of your affordable limit, then start saving for it. There are lots of ways in which you can get started with savings:

• Start with saving in banks that offer better interest rates.

• Look for ways to invest your money.

Create a short-term or long-term financial goal:

A short-term goal can be a down payment for a car. A long-term goal can be a down payment for your dream home. This will surely reduce your burden of debts. Once you have saved a good amount, the installments may be paid off in a short span. You can even start saving once you clear your monthly installments.

Summing up:

Getting into debts is very easy but getting out of it will take huge efforts and time. You need to manage your finance wisely or else you will end up in trouble. Through debt management, you will be able to learn to balance between your debts and savings.

How Can You Keep Your Property and Eliminate Debt in Personal Bankruptcy?

The United States Constitution gives you the ability to eliminate your debts when your financial obligations become too much to bear. Depending on your  situation, you can seek financial relief under these two types of personal bankruptcy: Chapter 7 and Chapter 13.  Both options allow you to keep your property but with certain conditions.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy provides financial relief by eliminating all or a portion of your debts.  Most types of unsecured debt (such as credit card and medical bills) are discharged in Chapter 7. In a Chapter 7 bankruptcy case, the court treats your assets as potential means of repaying your debts. When you file for bankruptcy, all your assets become part of the bankruptcy estate.

Exempt and Nonexempt Assets

There are certain types of assets that are exempt from being sold to pay back your creditors, while some types of assets are not exempt. The assets that can be sold are referred to as nonexempt assets. The bankruptcy trustee is going to sell a nonexempt property with significant value.

Assets that you have to give up include:

  • A second house
  • A second vehicle
  • Heirlooms
  • Cash and investments
  • Valuable collections

Assets that you can keep include:

  • Pensions
  • A portion of home equity
  • Vehicles up to a certain amount
  • Household appliances

Many individuals who filed for Chapter 7 bankruptcy are able to retain possession of all or most of their assets. But those who own substantial equity or assets that are nonexempt could lose them to pay back creditors.

When you complete the Chapter 7 bankruptcy all your debts are discharged with the exemption of non-dischargeable debts, such as student loans and child support.

Chapter 13 Bankruptcy

You can protect your secured assets from creditors and bankruptcy trustee in Chapter 13 bankruptcy. However, you will have to continue paying your secured debts and pay off arrears.

Chapter 13 bankruptcy prevents creditors from taking away your property to pay your obligations to them. But if you own assets that are considered as nonexempt, you will likely be required to repay a bigger amount of your unsecured debts under a repayment plan in Chapter 13 bankruptcy. Moreover, you can only keep your assets if you keep up with your secured debt payments or pay all of them in your plan.

Even Nonexempt Assets are Protected in Chapter 13 Bankruptcy

Your nonexempt assets are not used to pay your creditors in Chapter 13 bankruptcy. On the contrary, the Chapter 7 bankruptcy trustee will liquidate your nonexempt assets. In exchange for allowing you to retain possession of all your assets, you repay all or some of your obligations through a court-approved repayment plan.

Your Assets Affect How Much Debt You Should Repay

Some of your debts will have to be paid in full in your Chapter repayment plan. Examples of these are unpaid mortgage and certain types of taxes. But the exact amount of unsecured debts (like credit cards and medical bills) to be paid depends on your nonexempt assets, expenses and income. Nevertheless, that amount is often much less than your outstanding balance.

You Can Catch Up on Unpaid Secured Payments and Keep the Secured Property

If you used a certain asset as security for a loan, you have a secured debt. And if you miss payments on your secured loan, your lender can repossess or foreclosure that property.  Examples of secured debts are car loan and home mortgage.

Chapter 13 bankruptcy can stop foreclosure  or repossession of your secured property and allow you to pay your arrears through an affordable repayment plan. As you catch up on your payments, the automatic stay blocks creditors from taking away your property.

You Have to Keep Up with Your Secured Debt Payments

To keep your property, you must also pay your the ongoing payables on your secured debts. Your unpaid mortgage bills have to be paid off through your repayment plan in Chapter 13 bankruptcy. But regardless if you have arrears, you must continue paying your regular payments. If not, your mortgage lender will seek to remove the automatic stay on your debt and proceed with the foreclosure process if allowed by a bankruptcy judge.

In contrast to a mortgage debt, you may have an option to pay off your other secured debts through your repayment plan.

Whether or not you exclude your secured personal property in your Chapter 13 filing, you need to make sure that you pay your lender on time. Otherwise, you risk losing that property. The lender could repossess or ask the court to lift the automatic stay on that property.

At the end of your Chapter 13 bankruptcy, the court will discharge most of your debts.

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Filing for bankruptcy is a very important decision. A skilled bankruptcy attorney can help you explore your options and create a viable game plan to protect and retain your assets in a bankruptcy case.