Almost half of Americans near financial collapse, report says

March 05, 2013 (Press-News.org) Almost half of Americans near financial collapse, report says

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The recent economic recession has been hard on many Americans. However, according to a new report, it may be worse than previously thought. According to the report from the Corporation for Enterprise Development, about 43.9 percent of U.S. households are nearing financial collapse.

The report found that in event of a health crisis, job loss or other financial emergency, this percentage of Americans lack the financial resources to live at the federal poverty level for only three months (called "liquid asset poor" by the report). To make matters worse, the report also found that many of those who considered themselves middle class Americans (those with annual incomes of $55,465-$90,000) could qualify as "liquid asset poor."

Additionally, 26 percent of households qualified as "net worth asset poor," because the assets of these households were outweighed by their debts.

The report also highlighted the importance of having a personal safety net in case of financial hardship. Unsurprisingly, the report noted that families that do not have emergency savings are more vulnerable to economic catastrophes such as homelessness, foreclosures and dependence on public assistance.

Bankruptcy may offer solution

For many people who are overwhelmed by debt or unable to keep up with their bills, bankruptcy may be a solution. Bankruptcy can offer people in such situations a fresh start by receiving the obligation to repay certain types of debt.

Generally, individual bankruptcy filers have two choices: Chapter 7 and Chapter 13. In Chapter 7 (which is also known as liquidation), the debtor's nonexempt property--property that can be sold under bankruptcy law--is sold. The proceeds of the sale are used to pay his or her debts. Once the sale has been completed, the debtor receives a discharge--a court order that relieves his or her responsibility to pay many types of debt existing before the bankruptcy.

Chapter 13 bankruptcy works by consolidating the debtor's debts into a repayment plan. Under the plan, the debtor makes monthly payments towards his or her debt for a period of three to five years. The amount the debtor must pay each month depends on the amount of his or her disposable income. The debtor can keep his or her property as long as he or she makes the monthly payments. Once the payment plan period has been completed, the debtor receives a discharge.

Both types of bankruptcy have their own qualification requirements, benefits and drawbacks. As this area of the law is complicated, it is important to consult with an experienced bankruptcy attorney. An attorney can consider your personal circumstances and recommend a debt relief option that would be right for you.