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Woman worried about financial problems. Jobless or to many bills
In this era, finances matter. Strong financial capabilities allow stability and growth. However, Americans are under financial stress now, more than ever. Due to financial woes, stress rates have never been higher than in the last five years. There are several contributing factors that are causing distress among many Americans. According to a survey conducted where thousands of people from all fifty states were asked to select from a list, what was the No.1 reason for their financial stress? The most commonly occurring answer was paying off their debt. The other reasons chosen from the list included:

  • Retirement worries
  • Lack of funds for an emergency
  • Desirous of upgraded lifestyle
  • Affording education
  • Maintaining Stability
  • Paying rent and bills

The sequence of the above list is according to the frequency of answers received from people. It shows that people have the most concerns about paying off their debt. After that comes retiring issues and, then, tension about not having enough money if an emergency arises. However, the lead cause of worry and financial stress was being able to clear off debt in the shape of credit cards.

Being able to face such worries and fears in the shape of planning is the best way to handle it. Running away from fears rather than addressing them will only worsen anyone’s situation even more. Being able to take actionable steps to correct any issues and to plan with a strategy is the best course of action that can be taken to decrease someone’s stress about money. Almost all states could report the following reasons for their woes and the ever-present motives for their increasing financial stress.

California

Not surprisingly, paying off debt is the most common reason for stress. With the most debt balance per capita, California is most burdened with mortgage debt, with student and auto loans being close seconds.

Texas

Texas has a smaller debt balance per capita but, still, the main stress agent here is paying off debts as well. Debt has decreased in this area but that doesn’t mean it’s any easier if you move to Texas.

Florida

On the national scale, Florida has a relatively smaller debt balance per capita than others. However, their higher credit card usage and loan debt doesn’t make life free of financial stress in this sunny state.

New York

Don’t be surprised if New York doesn’t host the highest total debt balance per capita. Most of the debt incurred in the Big Apple is the result of personal choices and running behind on payments that are due. This makes it the highest percentage of balance, which makes things much more difficult to straighten.

Illinois

Compared to the national average, Illinois is on about at the same level, standing at $45,010 debt balance per capita. But, at the same time, student loan levels are much heavier with a slightly higher debt on credit cards.

Pennsylvania

Student loans lead to a lot of financial stress. However, a lower debt balance per capita is true for Pennsylvania which is about the same for Ohio, below. Student loan exemptions are permitted for certain fields of work such as public service jobs, where students joining public service employment can qualify for loan forgiveness programs if they are burdened with federal student loans.

Ohio

The total debt here as compared to the national average is lower. But, with student loans rampant use, it has the highest per capita of student loan-based debt. For relief here, several pay-off methods can be taken. One method is refinancing your loans at a lower interest rate and another is income-based repayment plans to undo some financial stress.

North Carolina

Credit card debt is the number one worry in North Carolina. Due to lower income than the national level, the debt per capita difference is in the hundreds of thousands. Significantly at par with per capita debt, North Carolina residents have been seen to have some trouble in paying off debt.

Michigan

In Michigan, paying off debt is similarly the most commonly occurring reasons for distress, in terms of finances. The average credit card debt is lower here ,as is the hours of work available, which is needed to pay off mortgage loans.

New Jersey

For many people in New Jersey, retiring broke is the main cause of financial stress. However, New Jersey is regarded as one of the best states for retiring with riches. Medicare and social security benefits contribute highly to the good life after retirement.

Virginia

Paying off debt in Virginia is the main source of distress, also. Virginia has the third highest debt, in terms of credit cards, in the nation.

Washington

Higher than most states, Washington resident’s reason for distress is paying off debt. Its average credit card debt is higher than many states. Mortgage laws and regulations weigh heavily on locals and they have to work more hours than others in order to pay for their monthly mortgage plans.

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Close-up of a bankruptcy petition
When hearing the word bankruptcy, the first thing that crosses our mind is that it represents failure and shame. However, for many people around the world, bankruptcy is the path that can lead them out of a financial crisis. In conclusion, it isn’t for failures, it is for the people who realize and accept that, in order to be successful, they must start over.

There are a lot of things that can lead one into bankruptcy. Unexpected crises such as medical emergencies, loss of employment or a hefty loss in business can all cause irreversible damages to a person’s finances. Moreover, the average American is burdened by so many debts and expenses that it can get extremely difficult for them to sustain themselves financially. Speaking in terms of numbers, the average credit card debt for an American is around $15,800, student loans can amount to $24,000 on average, and mortgage debt can be a liability of at least a $100,000. The burden of repaying these, coupled with other expenses such as insurance premiums, vehicle loan payments and the basic costs of living, can cripple people if they are hit by a crisis which has a substantial impact on either their income or expenses.

Bankruptcy is considered, by many, to be somewhat of an extreme measure. However, by looking into the specifics, dynamics and the workings of bankruptcy, any individual can figure out if it will be a good decision to declare bankruptcy for the sake of their financial future.

Who is Bankruptcy for?

As said before, bankruptcy is an extreme decision. However, it can be a positive option for people who are unable to pay their debts despite the fact that they are minimizing their expenses. But, there are some things that you need to try before considering filing for bankruptcy. Your first efforts should be put towards renegotiating your debt. This can be done through credit counseling or a debt reduction program. Renegotiating might damage your credit score, but filing a bankruptcy means not being able to take out any kind of loan for several years. You should try to get the best results out of a renegotiating attempt if you plan on taking out a loan later on. In the case that you still must choose bankruptcy, you should adapt to living with your current income and, after becoming eligible for loans again, avoid making decisions that could land you in a financial crisis all over again.

What is Bankruptcy?

In simple terms, bankruptcy is like flicking the switch of your debt history off and then back on. It resets your consumer debts such as those associated with your credit card, vehicle, mortgage, etc.

Filing for bankruptcy means cutting off the relations with your creditors so that they won’t pursue you for payments and you won’t be able to get new debts from them (at least for some amount of time).

It is a misconception that bankruptcy ruins your reputation. It might hurt your chances of getting loans and credit, but that is all. It is basically a personal decision that enables you to restructure and renew your financial situation for the sake of yourself and your family.

Bankruptcy does not mean Losing Everything

It is widely (and wrongly) believed that bankruptcy leads to the loss of all assets. However, contrary to this, many assets that you own are protected by bankruptcy laws within the bankruptcy court. The assets include furnishings, retirement saving accounts, basic homes and vehicles (inexpensive ones). The specifics vary state to state and at the federal level, so you should check the laws in your state or area to have better information about what is protected.

On the federal level, retirement accounts are protected to a limit of $1,171,650. Other things that are protected include your 401(k) account, pension, disability, IRA and Social Security benefits. This is the reason why many lawyers recommend against borrowing from a protected account for the repayment of debt.

Benefits and Costs of Bankruptcy

There are many things that you need to compare in order to be sure that declaration of bankruptcy is feasible.
First, you should know that, on average, filing bankruptcy costs $2,500. In order for it to be feasible, the debt relief you get by filing bankruptcy should amount to more than $2,500.

Second, if student loans are your primary form of debt, then bankruptcy won’t have much of an effect because it isn’t possible to dismiss student debt in bankruptcy. The possibility of student loans being discharged is only present in a limited number of circumstances.

If your primary debts are unsecured such as credit card debt, medical debt, etc., then it might be easier for you to remove these via bankruptcy.

Conclusion

Bankruptcy can be difficult, both emotionally and because of the fact that it might damage your financial portfolio, hindering your ability to easily get loans in the future. However, it can be a tool for many to break free from loans that might be limiting and even posing a danger to the financial future of their family. If used wisely and strategically, it can help you start over and avoid any kind of mistakes you made in the first place.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.