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Brownsville Texas Bankruptcy Legal Blog

Should you turn to Chapter 13 bankruptcy to keep your home?

Getting behind on mortgage loan payments can create a significant amount of stress for a Brownsville resident. The prospect of losing the family home will often cause a homeowner to begin looking for a viable debt relief option. For many people, Chapter 13 bankruptcy provides the needed relief, though it may not be for everyone.

It is true that for many Brownsville residents, filing under Chapter 13 provides the ability to keep their homes. Filers propose a debt repayment plan lasting from three to five years that must be approved by the court. With that approval, the payments begin. Ordinarily, at the end of the repayment period, if all legal requirements are met and all required payments are made, the court issues a discharge for certain remaining unsecured debts, and filers can remain in their homes as long as they continue to make their mortgage loan payments as agreed thereafter.

That morning coffee isn't your biggest source of credit card debt

When Texas residents consider how to reduce their monthly budget, many people will tell them to cut out their morning coffee to save money. While that may be a good idea, it probably is not consumers' main source of credit card debt. Other luxury items seem to surpass it, and not giving up those expenses seems to create larger balances.

For instance, many consumers eat out or go through fast food restaurants on a regular basis. Entertainment can be expensive as well. Anyone who has been to a movie theater lately knows that. Perhaps other Texas residents charge their fitness memberships on their credit cards. All of these expenses can reach into the thousands of dollars, and if the balance is not paid off at the end of each billing cycle, interest charges add up quickly.

Could a workout agreement protect a homeowner from foreclosure?

For whatever reason -- a job loss, an illness or some other calamity -- Brownsville homeowners could find themselves struggling financially. It may become a challenge to meet the demands of a mortgage lender during this time. A homeowner may believe that it is possible to bounce back, but whether that can happen before foreclosure proceedings are filed remains a question. 

Approaching a lender right away about financial problems could leave the door open for a workout agreement. Of course, the lender must agree to change the conditions of the loan, which means that both parties need to get something out of the deal. Ostensibly, the lender continues to receive payments and the homeowner gets to continue living in the home.

Medical debt is a leading cause of bankruptcy

Recovering from the great recession did not include saving up for major health care expenses. Most people here in Texas and across the country felt fortunate they managed to get through it with their homes, their jobs and perhaps, some savings. Even so, an unexpected injury or illness could end up costing tens of thousands of dollars, if not more. Some people end up with hundreds of thousands or millions of dollars' worth of medical debt -- and that is with health insurance.

As it turns out, this scenario is not uncommon. A recent study found that somewhere in the neighborhood of 350,000 people file bankruptcy each year due to overwhelming amounts of medical expenses. That means that approximately 66.5% of the bankruptcies filed resulted from this type of debt. Even though the president recently issued an Executive Order attempting to make the medical industry more transparent about out-of-pocket costs for patients, emergencies and serious illnesses do not usually allow people to "shop around" for cheaper medical care, if that exists.

Top five causes of bankruptcy

Personal debt is growing nationwide. It seems that Americans are spending more money than they make, leaving them with thousands of dollars in debt. Surprisingly, overspending is not the leading cause of debt.

  1. Medical bills. Nearly 62% of all personal bankruptcies filed are due to medical expenses. Severe illnesses can cost thousands of dollars—even with insurance coverage. Not only do the medical bills cause a financial strain, but the recovery time that keeps a patient away from work may cause lost wages.
  2. Lost wages. Permanent or temporary time away from work often entail time without pay. Americans may not be able to afford their mortgage, car payment and other living expenses if a primary financial provider suddenly stops making money.
  3. Credit card debt. Uncontrollable credit card spending often leads to bankruptcy. Overspending may impact house payments, car loans and other expenses, causing debt to spiral out of control—making it impossible to pay it all back.
  4. Divorce. Divorce is expensive for both parties. Legal fees, the division of assets and child custody agreements can be messy and costly. If you have to pay alimony or child support, your finances will really take a hit.
  5. Unexpected expenses. Unexpected medical expenses, natural disasters, burglary, and other unforeseen expenses are the fifth most common cause of bankruptcy. Keeping an emergency fund may help cover unexpected expenses.

Will Chapter 7 bankruptcy resolve your financial issues?

These days, it would be difficult to find someone here in Texas who does not have some form of debt. The difference is that not everyone has the capability to repay debts, especially after some sort of financial setback such as a job loss or a divorce. Whether you experienced an event such as this or the amount of your debt simply got away from you, it might be time to consider your debt relief options, including filing for Chapter 7 bankruptcy.

If your circumstances have reached the point where you receive daily, harassing calls from your creditors or collection agencies, bankruptcy may be looking like a good option. The same could be said if your auto lender threatens to repossess your vehicle and/or your mortgage loan lender wants to begin foreclosure proceedings because your loan is in default. Perhaps one or more creditors received court judgments against you and began garnishing your wages.

Will a Chapter 7 bankruptcy deplete bank and retirement accounts?

The inability to meet financial obligations is something that many Texas residents experience at one time or another. Some people are able to recover from these circumstances, but others cannot. In those cases, they may consider filing for Chapter 7 bankruptcy, but worry they may lose the money in their bank and retirement accounts.

Losing these accounts could be a real concern for some people. Fortunately, a large number of filers do not have to worry. The goal of bankruptcy is not to leave an individual or family with no means of financial support. However, if the balance of a bank account is above a certain amount, at least a portion of it could be used to repay creditors.

Avoiding credit card debt won't make it go away

It might surprise some Texas residents to know that not everyone pays attention to their financial obligations. One recent study conducted by U.S. News and World Report involving 1,000 adults found that approximately 21% of the participants did not even know if they have credit card debt. Under these circumstances, consumers could easily end up in a precarious position when it comes to their finances.

The amount of credit card debt of Americans reached $870 billion on around 480 million accounts in 2018, according to the latest reports. The Federal Reserve says that this is an all-time high. Current data indicates that 100 million of those cards were acquired since the recession.

Owning certain assets may make a Chapter 7 bankruptcy a bad idea

Perhaps a Texas resident has spent several years accumulating certain assets but then falls on hard financial times. With the debt continuing to mount, he or she decides to look into filing a Chapter 7 bankruptcy in an effort to correct the situation. However, if a person owns certain assets, this may not be the right move.

This type of bankruptcy is commonly referred to as the "liquidation" bankruptcy. The trustee sells the filer's property and uses the proceeds to pay creditors. Fortunately, not all of a person's property is sold since the law acknowledges that people need some assets in order to live. When filing a Chapter 7, the law allows filers to retain property that falls under the category of exempt.

Credit card debt continues to rise in the US

The economy has improved, and when that happens, people tend to loosen their purse strings and spend more money. Unfortunately, this often means incurring credit card debt. It may not surprise many Brownsville residents to know that this type of debt continues to rise across the country, which could end up causing serious financial issues for some.

Companies and banks that issue credit cards received upward of $113 billion in interest from their customers in 2018. That is a 12% increase over the prior year. Projections for 2019 indicate that number could rise to $120 billion by the end of 2019.

Office Location

Limon Law Office
890 W Price Rd
Brownsville, TX 78520

Phone: 956-465-2661
Fax: 956-544-4949
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