Debt and Bankruptcy Issues

Debt and bankruptcy issues can pose obstacles for those seeking to improve their financial situation. Foreclosure, disrupted retirement planning and relationship problems are just a few of the financial hindrances that can accompany debt and bankruptcy. Sometimes debt is an inevitable occurrence arising out of events such as job loss; other times it can be avoided. Regardless of how debt is incurred, being aware of the potential financial difficulties that develop out of debt can prevent it from becoming issue laden.

Taxes

Delinquent and back taxes can become a major financial issue for debtors, particularly because of the powers afforded to government and its agencies. For example, the IRS can place liens and levies on property, in addition to garnishing wages. Similarly, in the State of Missouri, a lien can be issued for failing to deliver requested tax information pertaining to a suspected tax payment deficiency. Staying aware of tax obligations, properly completing IRS income withholding forms, and maintaining good tax records can help reduce tax debt issues.

Marriage

Marriage can cause debt and bankruptcy issues through poor management and miscommunication regarding debt. The Northwest Women's Law Center claims debt does not even have to be signed for it to become a liability issue. This legality puts both partners in a marriage at financial risk of unknowingly and vicariously incurring debt for one another. To prevent marital finances from leading to debt issues or bankruptcy, strong marital communication regarding finances is beneficial.

Collections

The Fair Debt Collection Practices Act outlines several consumer rights that are designed to protect debtors and those near bankruptcy. Abusive collection practices can make a debtor's financial situation worse, especially if his is manipulated or forced into paying more than he can afford. Even after a Chapter 13 bankruptcy, debt collection efforts can become unmanageable. Being aware of the civil rights afforded to debtors is a good way to help ensure high debt becomes less threatening, and more controllable.

Credit

Common issues resulting from debt and bankruptcy include lowered credit score, loan disqualification and high borrowing rates. The Fair Isaac Corporation, creator of the FICO credit score states delinquent debt that has been paid can stay on credit reports for seven years. Similarly, Chapter 7 bankruptcies can remain on a credit report up to 10 years, according the Experian credit bureau. Higher borrowing costs can potentially end up costing more than the cost of properly paying off debt in the first place.

Fraud

The Federal Trade Commission receives hundreds of thousands of fraud and identity theft complaints each year. These crimes can cost its victims well over a billion dollars for the same time period. Statistically, this highlights the potential for undue debt created by fraud. Fraud can strike unsuspecting consumers in their bank accounts, credit cards and even utility services. By taking steps to protect identity and prevent fraud, consequent debt issues can be avoided.