There are many mistakes that keep people from becoming debt free. As the economy stays in the doldrums many Americans income has followed suit. The lucky individuals still have their job but the days of the big bonuses and the people that sell on commission that used to live large is a thing of the past. One of the biggest mistakes that keeps people away from being debt free is the inability to change your lifestyle to match their finances. There are households making $100,000 a year and the family is living beyond their means on credit, then it only makes sense when the income is cut in half to reduce the family’s spending habits. The problem with this scenario is, many times it’s too late and filing bankruptcy is the only option to fix this financial problem.
Over the last 10 years, Americans have learned to live way beyond their means on credit. The average American household has $20-$30,000 in credit card debt. Taking into consideration the average American household only earns $41,000 a year it doesn’t take a rocket scientist to figure out that filing bankruptcy is in the future. Having this kind of debt with this small amount of income that makes it obvious that the debtor will never be able to get out from under it. For families in this situation, Chapter 7 bankruptcy is king. Filing Chapter 7 bankruptcy will stop all the craziness in its tracks. First of all, once the bankruptcy is filed the automatic stay goes into effect stopping all collection activities by the creditors. This means the debtor no longer has to worry about the phone calls and scraping enough money together to make a minimum payment to get these people off their backs. Having some breathing room allows the individual that is filing for bankruptcy to come up with a game plan for the future. In the end, the debtor will end up with a bankruptcy discharge wiping out all unsecured debts that include, credit cards, medical bills, payday loans and personal loans. Many people will leave a bankruptcy filing being virtually debt-free from all unsecured debt. Being debt free is the ultimate goal of filing bankruptcy. Individuals buried under a mountain of debt should consider speaking with a bankruptcy attorney to see if filing bankruptcy will help in their situation.