At the end of a successful bankruptcy case, a filer’s qualifying unsecured debt load is discharged by the court. After a specific debt balance has been discharged, the filer is no longer responsible for its repayment and creditors can no longer ask that it be repaid. Although not all unsecured debts are dischargeable in bankruptcy, two of the most common sources of financial anxiety for American families – credit card debt and outstanding medical bills – are dischargeable upon the conclusion of a successful bankruptcy case.

There are two primary reasons why eliminating credit card and medical debt via bankruptcy is often so beneficial for families. First, alleviating the pressure of paying these accounts every month can dramatically impact the stress level within a household for the better. Second, freeing up the funds that would ordinarily be used to pay these accounts means that they can be directed elsewhere.

The Benefits of Having More Liquid Income

According to a recent Bankrate survey, more than one out of every three Americans has more credit card debt than savings to be utilized only in the event of an emergency. What is particularly striking about that statistic is that it reflects more than an 11% increase from the number of Americans who were struggling with these circumstances only one year ago.

Per the requirements of Executive Order 12968, an applicant for security clearance must consent to the review of their financial records and consumer reports. As a result, when an applicant submits a security clearance application, those who are investigating their fitness for this access will see if the applicant has recently filed for bankruptcy. This can be a tough reality to swallow for someone who is eager to leave the consequences of their debt relief needs behind them.

There are so many benefits that bankruptcy filers experience when they take advantage of this personal debt relief opportunity. Yet, it is undeniable that filing for bankruptcy can lead to some challenges under certain circumstances too. For instance, while filing for bankruptcy is not likely to impact the outcome of an applicant’s security clearance investigation, it could if aggravating circumstances apply to an individual’s situation.

The Subjectivity of the Security Clearance Application Process

When individuals apply for employment within a federal government agency, they are generally subjected to a suitability determination in order to better ensure that they meet the criteria set forth in Executive Order 10450. This EO explicitly insists that those who are employed by the federal government must not only be loyal to the U.S., but they must also be trustworthy, of solid conduct and character, and they must be reliable.

Homeownership can be very rewarding, and a home is often one of the best financial investments an individual or married couple can make. Unfortunately, a family can encounter financial setbacks that may affect their ability to make ongoing mortgage payments. Defaulting on a mortgage may put a homeowner at risk of foreclosure, and in addition to potential financial losses, they may be concerned about their family's ability to continue living in their home. However, there are options available for homeowners who are facing these difficult situations. Filing for bankruptcy is one such option, and it can provide a family with some much-needed protection from creditors while providing them with options that will allow them to maintain ownership of their home.

Understanding Bankruptcy

Bankruptcy is a legal process in which an individual or married couple declares that they are unable to pay back their debts. Depending on the type of bankruptcy filed, a debtor may be able to completely eliminate some or all of their debts, or their debts may be reorganized to ensure that they can make affordable ongoing payments.

If you are considering filing for bankruptcy, you have multiple options. Chapter 13 bankruptcy may be the preferred choice in situations where you want to avoid the loss of your assets or where you wish to avoid foreclosure and maintain ownership of your home. In a Chapter 13 bankruptcy, a repayment plan will be created, and you will make ongoing payments toward this plan for several years. If your income is below the median income in your state, your repayment plan will last for three years. If your income is above the median, you will be required to make payments for five years. The amount you will be required to pay will be based on your disposable income. However, the process of calculating your disposable income can be complicated, and you will need to understand the factors that may affect the amount you will pay and your ongoing financial concerns.

How Disposable Income Is Calculated

Disposable income is the money that you have left over after you pay your essential living expenses. You should be able to make sure you will have sufficient financial resources to support yourself and your dependents during a Chapter 13 bankruptcy. After calculating the amount you earn and setting aside reasonable amounts that are necessary to meet your own needs and those of your family, the remaining amount may be put toward your Chapter 13 repayment plan.

If you are considering bankruptcy, you may have multiple different types of debts, and it is important to know how these debts will be handled during your case. Specifically, if you are planning to file for Chapter 7 bankruptcy, you will want to understand how your unsecured debts will be addressed. This can ensure that you will be able to eliminate your debts successfully and achieve a fresh financial start. 

What Are Unsecured Debts? 

A debt is considered to be unsecured if it is not backed by collateral. That is, rather than having the assurance that they can take possession of property such as a car or home, a creditor will rely on the promise that the amount owed will be repaid. The most common types of unsecured debts include medical bills, credit cards, payday loans, utility bills, and personal loans. These debts do not have an asset attached to them that can be repossessed and sold off if the debt goes unpaid; instead, creditors may take legal action against you if you fail to make payments on your unsecured debt, and they may attempt to recover the amount owed through a judgment in court.