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3 things you should know about equity and bankruptcy

Buying a home is a major responsibility. If you are well into your mortgage and discovering that you can no longer afford payments, though, it can seem like little more than a burden. Countless Americans make payments on their mortgage every month, but it is one of the biggest debts—if not the biggest—that most people have, and there is a reason why so many end up going into foreclosure.

According to NeighborWorks America, in fact, one out of every 200 homes in America will eventually be foreclosed. When it comes to debt relief, you may consider bankruptcy, but perhaps you are concerned about the equity—or lack thereof—that is contained in the value of your home. 

Foreclosure rates in Illinois still high

While more people in other states are seeing some financial relief and have been able to keep their homes rather than lose them due to insolvency, this is not the case in Illinois. Foreclosure rates here are still relatively high. Those individuals who may lose their homes to the foreclosure process may have options that will help them turn things around.

A recent report listed the states in which foreclosure rates are the highest. Illinois ranked in fifth place. According to the report, currently, one in every 1,375 homes is taken back by the mortgage lender. That may not seem like a whole lot, but looking statewide it adds up quickly. What is it about Illinois that contributes to this problem?

Do high-income people qualify for bankruptcy?

It might be natural to think that bankruptcy is only for lower-income people. After all, if you earn a high income, should you not be able to pay your bills?

The reality is that both low-income and high-income people can qualify for bankruptcy. For example, anyone of any income can find themselves struggling with credit card debt and mortgage payments. That said, your income is likely to play a significant role in which type of bankruptcy, Chapter 7 or Chapter 13, that you qualify for.

DIY estate planning, is it right for you?

Numerous Illinois residents like to work on projects by themselves. Some do it for the satisfaction it can give from accomplishing something, while others get on the DIY wagon because it can save them a lot of money -- or at least they think it can. When it comes to certain projects, like getting estate planning done and out of the way, a DIY plan may sound like a good idea, but going this route could have some serious consequences in the end.

Why do people consider DIY wills and other estate planning documents? First off, they can save time. Who wouldn't want to sit at their home computer, click a few buttons and be done? Secondly, they can save money. DIY estate planning products can be pretty cheap -- just remember, they are this way for a reason.

Is Chapter 13 bankruptcy right for me?

You've been struggling to pay your bills for a while. You have money coming in, but too much going out. You are getting to the point where you may start losing everything. Before it gets any worse, you want to know what options you have to solve the problem. You, and other Illinois residents like you, may benefit from a Chapter 13 bankruptcy filing.

Chapter 13 filings are reserved for people who have steady incomes but are simply overwhelmed with debt obligations. This is a debt relief option for people who want to keep their property and just need an affordable payment schedule to pay off their creditors. It can be a good option for you if you can achieve court approval.

A Chapter 7 filing is not the end of the world

Numerous Illinois residents are struggling financially due to job loss or lack of sufficient income to pay their debts. In order to help their economic situations, some will turn to Chapter 7 bankruptcy to clear their debts and achieve a fresh start. While there are those who would advise against this due to the impact such a filing can have on one's credit score, a recent report suggests that filing for bankruptcy really is not the end of the world.

Following a Chapter 7 bankruptcy, the filing will remain on one's credit report for 10 years. That sounds bad, but according to LendingTree, a little over 40 percent of bankruptcy filers are able to raise their credit scores back to 640 within a year of bankruptcy approval. Roughly 65 percent of filers are able to achieve credit scores over 640 in a two-year period.

How to wipe out credit card debt

Far too many people in Illinois and elsewhere depend on their credit cards to survive. Because of this, credit card debt is a major problem in the United States right now. It is believed that most households carry balances on credit cards. What can be done? How can one wipe out credit card debt?

According to a recently published article, there are a few different ways a person can pay off or get rid of credit card debt. The first is by using all disposable income to pay down the debt. This takes a lot of effort and requires discipline in sticking to a strict budget. It can work, if balances are low enough to be paid off fairly quickly. If accounts have high interest rates, this may not work, as interest will just continue to grow despite the efforts to pay down the balance.

Can a Chapter 7 bankruptcy cause more debt?

When Illinois residents hear the word bankruptcy, they think debt relief. This is particularly true for Chapter 7 bankruptcy, as this form -- if approved -- results in the complete discharging of certain debts. Is there ever a time when filing for bankruptcy can actually cause a person to take on more debt after the fact?

There is a trade-off when filing for Chapter 7. Yes, one may achieve some level of debt relief; various debts may be wiped clean off one's record. However, credit scores take a big hit, making it difficult to obtain credit either at all or with decent interest rates. So, if one is not careful about finances after filing for bankruptcy, he or she could end up basically trading one debt for another.

3 things you should know about bankruptcy

Many people carry high credit card debt or medical bills, and if financial circumstances change, it can be challenging to keep up with these debt payments. Getting trapped in overwhelming debt can happen quickly and soon become unmanageable.

This is not just an issue for young people who may have taken out a credit card without sufficient income. Many times, financially well-established couples get in over their heads with debt as they are heading into retirement. The good news is that there are options for people who feel suffocated by a massive debt load. Filing for bankruptcy is often the first positive step for building a fresh financial future.  

Heading into retirement, is filing Chapter 13 or 7 a good option?

Debt, just about everyone has it. It does not matter at what phase of one's adult life one is currently in, money struggles can happen at any time. Illinois residents, particularly those who are heading into or currently in their retirement years and are burdened with significant debt, may want to know if filing a Chapter 13 or 7 bankruptcy is the right way to address their situations.

A 63-year-old woman in another state did recently reach out to a financial advisor with such a concern. She has a car loan, a mortgage on a house that constantly needs repairs and quite a bit of credit card debt. She is already retired and her monthly income is not enough to cover all of her living expenses and debts.

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