Tag Archive for: bankruptcy

Bankruptcy and Medical Bills: Managing Healthcare Debt in Tough Times

Medical debt affects nearly everyone, but it can be especially burdensome for those with chronic illnesses that require long-term hospitalization and time away from work. According to the Consumer Financial Protection Bureau (CFPB), Americans had amassed $88 billion in medical debt as of mid-2021, a figure reflected on credit report data. 

Although most medical debt collection items are around $500, many consumers have multiple such items on their credit reports. In fact, past-due medical debt is the leading cause of personal bankruptcy. 

If you are experiencing crushing medical debt, you may also be wondering if there is a solution. For example, can you get rid of your debt by filing for personal bankruptcy? This is one option that many people pursue. 

The Impact of Medical Debt on Households and the Economy

According to a Kaiser Family Foundation (KFF) analysis, medical debt is a consistent problem despite more than 90% of the U.S. population having some form of health insurance. For individuals with limited means, even a small medical expense or emergency can be unaffordable. And people with significant expenses are likely to build up major debt over time. 

A KFF survey revealed that people with medical debt often cut spending on other items like food and clothing or depleted their savings to pay mounting medical bills. This is not only a personal hardship but also a societal harm. When individuals and families can’t afford the necessities due to medical debt, they also won’t spend money on other things like eating out, vacations, or buying a home. 

Using Personal Bankruptcy to Wipe Out Medical Debt

It’s not uncommon for people to file for personal bankruptcy when they are struggling to pay medical bills. A bankruptcy will eliminate debts from hospitals, doctors, ambulances, pharmacies, and other medical providers. It will also address other qualifying debts like personal loans, credit cards, utility bills, leases, and more. 

Unsecured Debt in Bankruptcy

When you file for bankruptcy, the distinction between secured and unsecured debt is important. Secured debt is anything backed by collateral, such as a loan on a vehicle or a home mortgage. While bankruptcy can wipe out the debt, the lien usually survives bankruptcy, meaning the lender can repossess a vehicle or foreclose on a home. 

However, medical debt doesn’t have any collateral. Similar to credit cards, it is considered unsecured debt. When this debt is discharged through bankruptcy, it is gone forever. Further, filing for bankruptcy gives you an automatic stay, which means providers and collectors can no longer contact you or pursue collections. 

Medical Bills and Chapter 7 Bankruptcy

Chapter 7 bankruptcy is one type of personal bankruptcy you can use to eliminate medical debt. If you owe a lot of debt, you likely won’t have any problems meeting the means test. You may need to forfeit some non-exempt assets, which the bankruptcy trustee will liquidate to repay the debts. However, many people who file for Chapter 7 bankruptcy are able to hold onto essential assets like their family home and vehicles. Before filing for bankruptcy, it’s important to understand these options and your rights. 

Medical Bills and Chapter 13 Bankruptcy

Chapter 13 bankruptcy is the other option if you are considering personal bankruptcy. This requires that you create a three to five-year debt repayment plan, which would have a single reduced payment that is divided among your creditors. If you successfully complete the repayment plan, the remainder of your debts will be fully discharged. Many people choose Chapter 13 bankruptcy when they can’t meet the Chapter 7 means test or they have non-exempt assets they wish to keep. 

Alternatives to Bankruptcy to Address Medical Debt

Personal bankruptcy isn’t the only option for addressing medical debt and other unsecured debt. Some people choose debt consolidation, which involves taking out a loan with a fixed monthly payment to pay off all of your outstanding debt. But, if the interest rate is higher than what medical providers are charging, this may not make sense. 

In some cases, you can also negotiate directly with a medical provider to settle outstanding debt. These businesses recognize that it’s better to receive some payment than nothing at all. The provider might waive a portion of the debt if you offer to make a reasonable lump sum payment.

Finally, some state lawmakers are also attempting to address the medical debt crisis. For example, at least a dozen U.S. states are considering legislation to create medical debt relief programs or protect personal property from medical debt collectors. 

Bankruptcy is one of the many debt relief options for managing healthcare debt in tough times. But you don’t want to jump into a complex legal process before you understand the facts. A knowledgeable bankruptcy attorney can explain your options and guide you through this process. This will ensure you make sound financial decisions that can carry you through into the future. 

How to Rebuild Your Credit After Bankruptcy

Filing for bankruptcy may be the best decision for you if you are suffering from high amounts of debt. However, while filing for bankruptcy can help to discharge your debts or create a manageable repayment plan, it’s important to know that a bankruptcy filing will have a major impact on your credit score. To be sure, filing for bankruptcy can show on your credit report for between seven and 10 years after your filing, making it difficult for you to secure new lines of credit, get a loan, or even be hired for certain jobs.

Fortunately, there are steps that you can take to rebuild your credit after bankruptcy and get yourself back on stable financial footing. Here are some tips for rebuilding your credit after bankruptcy:

  1. Keep Up with Your Current Payments

The number one most important thing that you can do when you are recovering from bankruptcy is to refrain from incurring any new and unmanageable debt. This means that if you do have any existing lines of credit, it is essential that you keep up with your current payments—this means making payments on time and in full each month. Making your monthly payments should be your number one priority.

And it’s not just loans and credit cards—if you have other bills, such as medical bills, utility bills, etc. that could result in your account being turned over to collections, do everything in your power to find a way to pay these down.

  1. Monitor Your Credit Score

Not only should you keep up with your monthly payments, but you should also have a solid idea of where your credit score currently sits and what impacts it. Fortunately, there are free and easy ways to do this. One option for checking your credit score at no cost to you is to use AnnualCreditReport.com.

In checking your score, make sure that you flag anything that doesn’t look right—such as a claim that you didn’t make a payment in full that you believe you did. If something is misreported on your credit report, you have the right to challenge it.

  1. Consider a Secured Credit Card

One of the downsides of filing for bankruptcy is that it can make it difficult to get a credit card until the bankruptcy filing is no longer reflected on your credit report. One strategy for getting around this hurdle is to open a secured credit card. A secured credit card is a type of card that is backed by a deposit that you pay. For example, you may have to make a deposit of $500 in order to get a credit card with a $500 limit. It may not sound like much, but it can be the first step toward responsibly using credit again. Note that in addition to a deposit, secured cards typically also have higher interest rates and may carry annual fees as well, so be sure to weigh the benefits and tradeoffs before choosing this type of card.

  1. Create Good Overall Financial and Budgeting Habits

Making credit card payments on time and in full and responsibly using a new credit card will be rooted in good financial habits. After bankruptcy, it’s a smart idea to set some financial goals for yourself. For example, now’s the time to review your spending-to-income ratio and create a budget, build up an emergency fund, and understand the best practices for spending as they relate to housing, credit, and more.

  1. Find a Co-Signer

Sometimes, rebuilding credit after a bankruptcy filing can feel a bit like a chicken and egg scenario—you know you need to rebuild your credit score, but you need a credit card to do so; however, you can’t get a credit card or open a new line of credit or a loan because your credit score is currently too low!

This can be frustrating, but it’s not helpless. One option for opening a new line of credit or securing a loan is to find a co-signer. If you have a close friend or family member who has a strong credit score and a stable source of income and who is willing to co-sign for you, this can help build your score. However, it is a big ask of your friend or family member—and they’ll be on the hook for any missed payments, too.

Start Rebuilding Your Credit After Bankruptcy Today

Filing for bankruptcy can be a scary decision, but it may be the best one to give yourself the clean slate you need to move forward. Once your bankruptcy filing is complete, it’s time to start rebuilding your credit. Keeping up with your current payments, monitoring your credit score, considering a secured card, creating good overall financial and budgeting habits, and finding a co-signer for any new loans or lines of credit can all help.

Bankruptcy and Tax Debt: What You Need to Know

If you have thought about bankruptcy, chances are that your understanding of bankruptcy is that filing for bankruptcy will eliminate your debts and give you a clean slate moving forward. While it’s definitely true that bankruptcy can provide a fresh start, it’s important to understand that not all debts are forgivable in a bankruptcy filing and that for some types of debt, what you can discharge depends on the type of bankruptcy for which you file.

When it comes to tax debt, there’s a common misconception that if you have tax debt and file for bankruptcy, the government will forgive all of your debts—including your tax debt. Unfortunately, this just isn’t necessarily true. Here’s what you should know about bankruptcy and tax debt—remember, it’s always good to talk to a professional before filing for bankruptcy.

Can You Discharge Tax Debt?

If you are filing for bankruptcy and have tax debt, there are only certain situations in which you may be able to discharge your tax debt. In fact, you can only discharge tax debt if the following criteria are satisfied:

  • The tax debt is only for income tax. If you owe taxes for anything other than taxes on earned income, you cannot discharge it in a bankruptcy filing.
  • The tax debt occurred as a result of an honest mistake or debt—it cannot have occurred out of willful evasion or tax fraud.
  • You filed a tax return for the tax debt that you are trying to discharge. In some courts, you can’t discharge debt even if you filed a late return, so make sure you ask the legal professional you’re working with if this applies to you.
  • The tax debt must be at least three years old.
  • Enough time must have passed. The IRS maintains what’s known as the 240-day rule, which means that the income tax debt must have been assessed at least 240 days before you file for bankruptcy.

Only if your debts meet all of the criteria above may they qualify for discharge during bankruptcy.

What About a Tax Lien?

If you fail to pay a tax debt, the government may issue what’s known as a tax lien. A tax lien is the government’s claim against your property. If the tax debt isn’t repaid, the lien gives the government the right to seize the debtor’s property. If the debtor does repay the debt, then the tax lien may be removed.

The bad news about having a tax lien—even if you’ve repaid it or are in the process of repaying it—is that you cannot discharge a federal tax lien, even if the tax debt meets the criteria for discharge listed above. That’s because the purpose of bankruptcy is to wipe away a personal tax, not to wipe out tax liens recorded prior to the bankruptcy filing.

Discharging Tax Debt and Chapter 13 vs. Chapter 7 Bankruptcy

The primary difference between a Chapter 13 and a Chapter 7 bankruptcy is that you must pass the means test to qualify for a Chapter 7 bankruptcy. With a Chapter 7 bankruptcy, your non-exempt assets will be liquidated, and your remaining debts will be discharged; with a Chapter 13 bankruptcy, on the other hand, you will enter a repayment plan to pay back debts and, in exchange, will be able to keep more assets. So how does this apply to those who want to discharge tax debt?

With a Chapter 13 bankruptcy and tax debt, some dischargeable tax debts might be forgiven without any repayment depending on the amount of disposable income you have. In any case, you won’t incur any interest on the tax debt that you owe.

If you file for a Chapter 7 bankruptcy on the other hand, your debt will be discharged if your debt meets the qualifications listed above and if you pass the means test—an income assessment that determines whether you have enough disposable income to pay back any portion of your existing debts.

Learn More About Bankruptcy and Tax Debt

If you are in a financial situation where bankruptcy is your best option, it’s important that you understand what debts may be dischargeable and how what you currently earn will impact which type of bankruptcy you file for, and how much of your overall debt is dischargeable. If you have questions about tax debt, you should consult with a financial professional or a bankruptcy lawyer. Filing for bankruptcy is a huge decision that will have a long-term impact on your financial health. Learn as much as you can before filing and explore all of your options in advance.

When Should I Consider Filing for Bankruptcy?

Managing your finances responsibly may sound like an easy task, but for many, making smart financial decisions isn’t always as obvious as it seems. From accidents and unexpected illnesses that lead to medical debt to low-paying jobs and layoffs that cut income streams, there are dozens of legitimate reasons why a person may be struggling to pay off debt.

While there is no panacea to managing or eliminating debt, there are many options depending on the details of your financial situation. One option for dealing with debt is to declare bankruptcy. However, before filing for bankruptcy, it’s important to consider your full financial picture and make sure you have an understanding of the consequences—both positive and negative—of bankruptcy.

Here’s an overview of a few things you should consider when filing for bankruptcy:

What Is Bankruptcy?

Bankruptcy is a legal proceeding that happens before a court. In a bankruptcy hearing, some debts may be discharged, assets may be liquidated to pay creditors, or/and the debtor may enter into a repayment plan with creditors.

While some debts are dischargeable in a bankruptcy hearing, it’s important to note that not all debts are forgivable. What’s more, while filing for bankruptcy may give you a clean financial slate that helps you to manage your debts, it severely impacts your credit score and can make it difficult to get approved for a loan for years in the future.

Things to Think About Before Filing for Bankruptcy

If you are drowning in debt, filing for bankruptcy may be an option that’s on the table. Before you file, however, there are multiple things you should think about first. Some of the most pressing items for consideration include:

  • Other debt-relief options. While bankruptcy can be a great option, note that it’s an intensive legal proceeding that can take time and money, and have long-term implications on your overall financial well-being. As such, it’s usually recommended as a last resort after other debt-relief options have been considered. Consider debt consolidation or negotiation, and talk to a financial professional about all of your options before filing.
  • Types of bankruptcy. If you’re thinking about filing for bankruptcy, it’s important that you understand the types of bankruptcy and which type may be most appropriate for your situation. For individuals, the two most common types of bankruptcy are Chapter 7 and Chapter 13.

Chapter 7 bankruptcy requires a debtor to liquidate any of their non-exempt assets. In order to qualify for a Chapter 7 bankruptcy, a debtor must pass a means test proving that they don’t have the income and resources to enter into a repayment plan. The alternative for those who don’t pass the means test is a Chapter 13 bankruptcy, which requires repayment of debt through a repayment plan but also allows a debtor to keep more of their assets.

  • Whether you need legal support. As you think about the bankruptcy process and the many legal documents and the court proceedings that filing for bankruptcy requires, you may consider hiring a lawyer. Before you hire a lawyer, it’s important to have a consultation first where you can ask any questions, get a feel for the attorney, and learn more about fee structures.
  • Your need for immediate relief. If you need immediate relief because you are being contacted by debt collectors nonstop and are at risk of having assets seized or having your home foreclosed on, filing for bankruptcy may be your best option. This is because when you file for bankruptcy, your filing will immediately trigger the automatic stay. The automatic stay in a bankruptcy case is an immediate pause on the ability of any creditor to contact you. This can provide you with the short-term relief and breathing room you need to take charge of your financial situation.

How to Learn More About When It’s a Good Time to File for Bankruptcy

One of the most important things to know about bankruptcy is that it’s not a decision you should take lightly. Before you file, you should learn as much as you can about all of your options, as well as what the bankruptcy process entails, whether you’re qualified to file for bankruptcy and if so, which type of bankruptcy is appropriate for you, and what the short- and long-term consequences of filing for bankruptcy will be. You should also consider whether you want to work with a legal or financial professional during your bankruptcy case.

Finally, while debt can feel terrifying and overwhelming, know that there are options available. By seeking help, you can start making smarter financial decisions that support your financial well-being long term.


Will My Car Be Repossessed If I File for Bankruptcy?

Depending on where you live, it’s often a necessity to own a car for work, school, and other daily necessities. When you’re struggling to make ends meet, you might fall behind on your vehicle payments in addition to some other credit accounts. Having your car repossessed would make a stressful situation even worse. 

Repossession of a vehicle can be upsetting under any circumstances. If you are thinking about filing for bankruptcy, can the lender still repossess your car? And, if your car has already been repossessed, will bankruptcy help you get it back? Here’s what you need to know. 

Filing Bankruptcy to Save Your Car

Car loans use the vehicle as collateral, meaning the lender has the right to repossess the property if you don’t make your payments. In fact, vehicle repossession can happen as soon as missing two car payments. 

If you file bankruptcy before a lender repossesses your car, this will put an automatic stay on debt collectors. Repossession proceedings will stop. But bankruptcy isn’t a means to get a free car. 

Bankruptcy, whether you file Chapter 7 or Chapter 13, will give you relief from unsecured debt. A car loan is considered secured debt. In most cases, the debt relief you receive will help free up cash so that you can catch up on your loan payments and save your car. But neither type of bankruptcy will help you keep a vehicle that you can’t afford. That said, the type of personal bankruptcy you file could impact how much you have to pay. 

Chapter 7 Bankruptcy

You may be able to work with your lender in some situations to refinance or modify your loan. If you can come to an agreement with your lender during the Chapter 7 bankruptcy process, you will likely need to sign a reaffirmation agreement outlining the new terms. When you sign this form after you file for bankruptcy, the lender has “refreshed” their right to repossess the vehicle if you don’t adhere to your end of the deal. 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy involves a repayment plan that lasts anywhere from three to five years. Your vehicle loan can be included in this plan, giving you reduced payments at a lower interest rate. This can make your car more affordable and less likely to get repossessed. 

Using Redemption or Reinstatement After Repossession

Assuming your car has already been repossessed, you may or may not be able to get it back through the bankruptcy process. If you do nothing or wait too long, the vehicle will be sold at auction. If it is sent to auction and the lender gets less than you owe for it, you’ll be presented with a loan deficiency, which is a bill for the difference. Again, the type of bankruptcy you file can impact your situation with a car that’s already been repossessed. 

Chapter 7 Bankruptcy

If you want to get the car back and it’s still available, you will need to pay what you owe to the lender. You may also have the opportunity to reaffirm the loan and negotiate more favorable terms. 

If you don’t want the car back or it’s already been sold, you can include the vehicle loan deficiency in your bankruptcy. It becomes an unsecured debt, meaning you’ll likely be able to get it discharged. 

Chapter 13 Bankruptcy

If your vehicle has been repossessed and you want it back, Chapter 13 is also an option. But it only makes sense if you are also filing to keep your home and other valuable assets. With this type of bankruptcy, you will negotiate an affordable payment plan with your creditors over the next three to five years. 

Protecting Your Car Equity in Personal Bankruptcy

When you file for Chapter 7 bankruptcy and wish to keep your vehicle, you also have to be concerned with your car’s equity. You are only permitted to keep so much property in a Chapter 7 bankruptcy. Otherwise, the trustee will sell non-exempt items to raise cash for creditors. 

Most states have motor vehicle exemptions allowing you to keep a certain amount of a car’s equity. You may also be able to use part of a wildcard exemption to meet the requirement to keep your vehicle. 

If you have overdue payments or equity you are unable to protect, you may be better off filing for Chapter 13 bankruptcy. You can catch up on your payments with the repayment plan and maintain possession of the car. 

If you are concerned about your transportation options or have questions about a vehicle repossession, an experienced bankruptcy attorney can give you the information you need. Gulf Coast Bankruptcy Attorney is dedicated to providing residents of the Gulf Coast with the resources necessary to make informed decisions about their financial future. 

Dealing With Debt Caused By the COVID-19 Pandemic

In addition to the risk of health complications or even death due to the coronavirus, the COVID-19 pandemic has also caused financial challenges for many individuals throughout the country. If you are now dealing with debt that was accumulated during the ongoing COVID-19 pandemic, you are not alone. While you may be feeling overwhelmed and anxious about your future, there are options for managing your debt available, and resources out there that can help. To learn more about dealing with debt caused by the COVID-19 pandemic, contact us today and we can help you reach out to an experienced Mississippi Bankruptcy Attorney to schedule a consultation.

You’re Not Alone – Many Are Suffering With Pandemic Induced Debt

According to BankRate and reported on by CNBC News, 42 percent of Americans have increased their credit card debt since the beginning of the COVID-19 pandemic. Of those who have experienced an increase in debt, nearly 50 percent say that the increase was directly caused by the pandemic. Many people who were laid off as a result of business closures and economic worries did not have enough savings to comfortably support themselves and their families, resulting in people falling behind on payments and turning to credit to pay for basic necessities.

Dealing with Debt: Resources and Tips

If you are dealing with debt, the first thing that you should do is take the time to figure out exactly how much debt you have and the source of that debt. For some people, it may be credit card debt; for others, they may be behind on mortgage or student loan payments. Once you know what type of debt you have, you’ll be better able to navigate the resources available and strategies for managing that debt.

  • Student loans. The majority of federal loans (not private student loans) are currently paused and interest is waived. The Biden Administration has extended the student loan pause until January 31, 2022. 
  • Mortgage payments. If you have a federally backed loan, you may be eligible for a COVID hardship forbearance if you have experienced financial hardship as a result of the COVID-19 pandemic. The Federal Housing Financial Agency (FHFA) has also extended foreclosure moratoriumsthrough the end of the year.
  • Credit card debt and personal loans. You’ll need to talk to your creditor/lender directly regarding options that may exist for you if you have fallen behind on your payments. Most large credit card companies, including companies like Chase and Wells Fargo, have announced assistance programs, including collection forbearance. Many banks and credit unions are also offering deferred payment options.
  • While several states have passed laws placing a moratorium on utility shut-offs, the current landscape in Gulf Coast states is not as friendly. In Mississippi, the law on suspending disconnections expired in May; however, in Alabama, utilities have continued to suspend disconnections for non-paying customers on a voluntary basis. If you are unable to pay your utilities, you should connect with your utility provider to discuss your options as soon as possible.

The above provides information that is specific to debt type; the following provides some general advice for dealing with debt during the COVID-19 pandemic:

  • Talk to your lenders/creditors. If you are falling behind on payments and are experiencing large amounts of debt, talking to your lenders/creditors directly is always a good idea. Even without state or federal legal protections in place, your lender/creditor may be able to defer payments or otherwise provide assistance.
  • Know your rights. Even without a moratorium on debt collection, creditors must still follow debt collection practices established by the Fair Debt Collection Practices Act. A debtor is legally prohibited from using unfair practices to collect debt.
  • Reach out to a credit counselor. When you are feeling overwhelmed with debt and aren’t sure what your options are, a credit counselor is a great source of information. A credit counselor can help you to get your finances in order and create a plan for managing your debt, which is empowering.
  • Connect with a bankruptcy attorney. In some cases, a person may be experiencing such a large amount of debt that filing for bankruptcy is the best financial option. If you have exhausted your other options for debt management, you should contact a bankruptcy attorney to discuss the next steps.

When you need help with debt management and bankruptcy is an option on the table, you need the advice and guidance of a legal professional. We can help you connect with an experienced Mississippi Bankruptcy Attorney. Gulf Coast Bankruptcy Attorney is dedicated to providing information to people struggling financially so that they can make informed decisions about their financial future.