Law Offices of Jennifer LaRese, LLC
Call Today 203-583-8668

Larese Law Blog

Considering bankruptcy as debt relief solution

Many Americans struggle with debt. Here in Connecticut, families accrue debt through credit cards, mortgages, medical bills, school loans and more. For some of these households, this debt can quickly come insurmountable. Thankfully, there are a variety of debt relief options available to American families, including filing for bankruptcy protection voluntarily. 

Voluntary bankruptcy is typically divided into two types: Chapter 7 and Chapter 13. Chapter 7 is the most well-known; when an individual files for Chapter 7, all debts deemed allowable by the court can be discharged. In a Chapter 13 solution, some debts can be discharged while others must be paid back under an agreed-upon payment plan. However, it is important to note that, in both cases, tax debt is not typically dischargeble. 

Considering Chapter 7 bankruptcy for debt problems

Bankruptcy is not an uncommon practice in American life, particularly during periods of economic instability. The average Connecticut resident likely contributed to the estimated $13 trillion in American consumer debt accrued by the end of 2017, and some may find themselves among the estimated 733,000 individuals and businesses that will file for Chapter 7 bankruptcy this year. Thankfully, bankruptcy is a viable and -- at times -- necessary strategy to handle serious debt issues. 

Most consumer debt can be fairly easily handled by a bankruptcy filing. While it can be difficult to prove the necessary undue hardship required for student loans to be forgiven, other forms of debt, like mortgages and credit cards, can be handled either through negotiating a lower payback amount or by filing for bankruptcy. Which option is better depends on the specifics of a given case. 

Filing for Chapter 7 bankruptcy is not the end of the world

Many people believe filing for bankruptcy is a negative financial move, leading to poor credit and a nigh-insurmountable fiscal challenge. Connecticut residents should be aware that a Chapter 7 filing does not have the long-lasting effects that films might have one believe. In fact, it can be one of the most financially responsible decisions an individual or company can make. 

While a bankruptcy filing will stay on a credit report for seven years in total, the impact on an individual's credit score can be less far-reaching than the total might suggest. In many cases, an individual who files for bankruptcy can see an improvement in his or her score inside of two years -- up to a credit score of 640, enough to qualify for many types of loans. While those loans might initially be more costly, the price can drop rapidly as time goes on.

Former baseball player files for Chapter 7

It is often widely disseminated that people file for bankruptcy as a result of poor decisions or poor planning. While this is sometimes the case, Connecticut residents need look no further than the case of Jack Clark, former power hitter for the St. Louis Cardinals, who is currently filing for Chapter 7 bankruptcy after a successful career and string of jobs post-baseball. Debt can affect any American in an adverse way, and bankruptcy is sometimes the most fiscally responsible way back to financial stability. 

Clark was a famed baseball player in the mid-1980s, but after his career ended, he ventured into the world of talk radio. He hosted a successful sports show until 2013, when his allegations of performance drug use by another player led to a costly lawsuit that saw him lose his show. He spent time flipping houses in order to make ends meet, but ultimately the debts he has accrued outstripped his ability to pay them back. 

How Chapter 7 bankruptcy can affect credit

Bankruptcy is often portrayed as a "last hope" for individuals or businesses facing overwhelming debt. But Connecticut residents should be aware that a great deal of misinformation is also disseminated about how bankruptcies like Chapter 7 influence an individual's credit score. While the news is not always uniformly positive, in the long run bankruptcy can turn out to be the best financial decision an individual can make. 

It is commonly believed that bankruptcy information remains on a credit report for 10 years. In truth, only the public record of a Chapter 7 filing remains for that long. Other bankruptcy references on a credit report last a maximum of seven. As these issues begin to disappear from a credit report over that time, many individuals experience a more positive credit score. 

Toys R Us prepares for Chapter 7

After a long and challenging battle to internally reorganize in order to fight mounting debt, one of the most recognizable companies in America is looking seriously at shutting many of its doors for good. Connecticut residents are familiar with Toys R Us, the retail giant that has provided clothing, accessories and of course toys to young Americans for decades. The company is in the midst of preparing to file for Chapter 7 bankruptcy and plans to shut down as many as 20 percent of all stores in the United States. 

The company initially filed for Chapter 11 bankruptcy protection, which involves reallocating funding and redistributing debt in an effort to make the load more manageable. Unfortunately, the weight of that debt, coupled with attempts to upgrade flagging store locations and e-commerce options, proved too much for the giant. While it is still possible for the company to receive a last-minute reprieve from an investor, the prospects do not look favorable. 

Music festival files for Chapter 7 bankruptcy

A famous jazz festival in a western state is ending a half-century run, according to business news. The society that runs the festival has filed for Chapter 7 bankruptcy, citing insurmountable debt. Business owners in Connecticut who run into tough financial times can rely on this form of bankruptcy to help them eliminate some of their debt by liquidating assets to repay creditors

According to the society's former president, the members of the board voted in December of last year to file for bankruptcy, but after consulting an attorney, they decided to hold off until the new year. The Chapter 7 filing took place in a federal bankruptcy court on Feb. 23. Previously, despite a Dec. 18 announcement that the festival would not continue, board members hoped to save the society through a reshuffling of budgets. 

Chapter 7 bankruptcy filed by famed university

A community remains shocked after a famous post-secondary educational institution has closed its doors due to debt and lack of funding. Educators here in Connecticut may be familiar with St. Gregory's University, the only Catholic university in Oklahoma, which has recently filed for Chapter 7 bankruptcy. It is hoped the filing will help the school administration to maintain some of the heritage associated with the 143-year-old school. 

Students and staff alike learned in Nov. 2014 that the school would be closing down at the end of the current semester due to a lack of funds required to keep the school operating. The school had previously applied for a loan totaling some $12.5 million from the U.S. Department of Agriculture, but unfortunately their loan application was denied. The Executive Administrator of the school later reported that St. Gregory's would be filing for Chapter 7 bankruptcy. 

Seeking debt relief through multiple means

Of all the debt issues that plague North Americans, credit card debt is among the most pervasive and persistent. Connecticut families understand the weight of this sort of debt, and they are always on the lookout for ways to put debt relief into practice. Thankfully, there are a variety of options available, from negotiating interest rates to Chapter 7 bankruptcy for more challenging situations. 

Discipline is a fundamental principle when it comes to reducing debt, as poor spending habits or inconsistent financial planning can lead an individual or a household into fiscal trouble. The first step is to determine exactly how much debt is being handled. When it comes to credit card debt, taking an account of the balance on all cards (as well as their interest rates) is often a good place to start. 

Music college files for Chapter 7 bankruptcy

A well-known college of music has closed its doors after filing for bankruptcy in federal court. Connecticut musicians may be familiar with the McNally Smith College of Music, a private college in a neighboring state. The company intends to use the Chapter 7 filing to liquidate its assets to pay down existing debt, a tactic commonly used by struggling businesses. 

The declaration comes after the school's closure back in December, with administrators citing financial pressure as the primary motivator for this decision. Since then, the school has filed for Chapter 7, and an accounting of its assets and debts has been submitted to the court. The filing lists assets falling between $10 million and $50 million, with liabilities between $1 million and $10 million.