What Are The Most Common Types Of Debt Californians Are Facing As It Relates To Bankruptcy?

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1. Unsecured Debt

   The most common type of dischargeable unsecured debt in California is credit card debt. Credit cards have corrupted the financial wisdom of many Americans. People are less likely to buy luxuries they can’t afford, if they have to pay using cash or debit.

   Medical debt is another common type of debt that Californians have. I have had clients who are undergoing expensive ongoing medical treatment, such as cancer treatments, not covered by insurance. They find themselves with hundreds of thousands of dollars in medical debt. Bankruptcy can take care of that sort of debt.

   Student loans are unsecured debts that are very difficult to discharge. However, filing bankruptcy to discharge other debt may enable the debtor to pay student loans more easily.

   Another type of nondischargeable unsecured debt is an obligation to pay spousal and child support.

   However, a debt to the former spouse that was incurred as part of a separation agreement or divorce decree is dischargeable in a Chapter 13 bankruptcy — though not in any other chapter.

2. Secured Debt

   A mortgage arrearage is another reason some people file bankruptcy. This typically happens when the debtor experiences a reversal of fortune. If the person falls behind on payments, but then secures a new job, the debtor may be able to cure the arrearage in Chapter 13 or Chapter 11. This avoids foreclosure on the home.

   A mortgage is a secured debt that is secured by the debtor’s home. Another common secured debt is a car loan. If a person falls behind on car payments, outside of bankruptcy the creditor will repossess the car. But a Chapter 13 plan can make curing the default possible.

3. How Big A Catalyst Is Job Loss In Filing For Bankruptcy?

   As with most of life, the answer depends on the context.

   On the one hand, a person who losses a job and has plenty of savings will probably not file bankruptcy.

   On the other hand, a person with little or no savings might be unable to pay debt that was not a problem before the job loss. In that context the job loss can be an impetus to file for bankruptcy protection. How long a person is not employed can also play a role in the decision to file for bankruptcy.

For more information on Bankruptcy In California, a free initial consultation is your best next step. Get the information and legal answers you are seeking by calling (562) 777-9159 today.