Have you seen the price of gas lately? Have you gone to your local grocery store and checked out the prices for basic food items? Have you been out to eat in the past six months? If you are paying any attention at all, you will have noticed a significant increase. The primary indicator that most folks notice is that of gas prices. The price of gas has nearly doubled in the last five years with a sharp increase during the most recent twelve months. Since gas prices are rising, that means the cost of all kinds of shipping has increased. This will lead to higher prices in all products that are shipped. Even service businesses will need to raise fees to cover the additional transportation expenses.
What this all leads to is increased bankruptcy filings. When cash money is tight, folks rely on their credit cards to finance normal living expenses. When the credit line becomes exhausted and minimum payments cannot be paid, the balances skyrocket. This is due to late fees, over limit fees and excessive interest rate adjustments. The inability to catch-up eventually leads to collector calls, future lawsuits, judgments and garnishments. When this eventually occurs, many will be force to turn to bankruptcy relief.
Chapter 7 bankruptcy is the most common form of bankruptcy relief. It basically provides relief for an honest debtor who has mostly unsecured debt and does not have significant assets. Often times, the person will choose to maintain a house or car while declaring bankruptcy. To do so, the person will have to continue to make timely payments on those items. There are several debts that are not eliminated in a Chapter 7 bankruptcy case.
Those include, but are not limited to student loans, parking tickets, recent taxes, child support, spousal support and debts incurred through fraud. However, in most cases, the majority of the debt is eliminated. Importantly, the credit card debt is eliminated.
An exception would be if the debtor utilized the credit cards too close to the bankruptcy filing and in contemplation of bankruptcy filing. In those cases, the creditor can file an adversarial complaint, seeking to hold the debtor liable for the recent credit card charges. When prices for normal living expenses become excessive, the natural result will be an increase in bankruptcy filings. People need to be very aware of how much they are spending each month. It may take a reduction in spending just to maintain the status quo under the current economic conditions.
David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs. Additional information is available at Chicago Bankruptcy.