Bankruptcy comes with a lot of unknowns, and for people who are going through the process for the first time, they will understandably wonder if their assets are at stake during the bankruptcy. In some cases, your assets may be at risk. Usually smaller assets will be liquidated during bankruptcy. However, under Louisiana law, you are able to make certain assets exempt during the bankruptcy process. Your home and car are two of the big examples in this regard.
Carrying debt will do funny things to your mind. People who would normally make calm, rational decisions starting making rash choices in an effort to eliminate the debt from their lives. Many people are like this, and they don't deserve ridicule for it because debt truly is a powerful, stressful force on a person's life. It is why you see so many television ads and hear so many radio ads by payday loan companies and debt consolidation businesses. These companies prey on the anxiety of people who are in debt.
Bankruptcy is an inherently complicated and heavy process for the person filing. It is scary and intimidating too, because the perception of bankruptcy is that once you file it, your credit will be ruined forever and your life will never be the same ever again. It is this stigma that we are trying to fight. Bankruptcy doesn't have to be this "world destroyer" that it is made out to be. To the contrary, bankruptcy can actually help you rebuild your credit score.
There are many different forms of debt. You can be indebted to credit card companies. You could owe money due to a medical emergency. You could have student loans, or car loans, or a mortgage. Debt comes in many, many different forms, and knowing how to tackle them is imperative to filing for bankruptcy -- or to avoid falling into inescapable debt in the first place.
Before we can dive in to the topic of reaffirmation agreements and, thus, answer the question posed in the title, let's discuss some basics about bankruptcy. As you know, when you finalize your bankruptcy, your unsecured debts will be eliminated in the discharge process. This is great because it means that you no longer have an obligation to pay your creditors. However, some of those debts may be attached to important pieces of property assets that you have, like your car.
Put yourself in the shoes of someone who has significant debt and is being called, emailed, and contacted by creditors on a daily basis. The interactions with these creditors and their associated debt collectors can be hostile, and the individual can end up living in fear of his or her cell phone or email account. Collection efforts are often ruthless and unyielding.
Debt can pile up in an instant, and all it takes is a major life event for your debt to run out of control. Purchasing a new car or home may be too much too quick, and as a result, your bank account runs dry. You may have a lot of student debt that drains your finances for a long time. Or maybe you make an impulse purchase with a credit card but you aren't able to handle the balance. All of these situations could lead to someone needing a bankruptcy filing to help with their finances.
The phrase "wage garnishment" gets thrown around quite often when the topic of debt or bankruptcy comes up. This is because some creditors will pursue debts that you owe, and when you fail to pay, they take legal action. Wage garnishment is the legal process by which a creditor forces your employer to withhold a portion of your paycheck to ensure they get paid. Wage garnishment can cripple the financial lives of people who are already in a difficult financial position.
If you haven't heard of the Public Service Loan Forgiveness program, that's okay. It was created a decade ago for people who work for the government or for a non-profit. The purpose of the program was to allow these workers to clear out their student debts if they had on-time monthly payments for ten years. Well, it has been ten years, and these workers have patiently awaited the day for their loan forgiveness. In fact, roughly 500,000 people applied to the program.
Bankruptcy is an inherently complicated process that will leave filers feeling confused about what the next steps are for them. Bankruptcy is certainly meant for individuals, but there are obviously situations where one spouse in a married couple needs to file for bankruptcy. So how does this work? How does it affect the other spouse? And what can the filing spouse expect going forward?