The health care costs and insurance issue in the United States impacts not only the health of Mississippi residents, but often their financial stability. Medical debt is a top cause of personal bankruptcy filings.
Long gone may be the days when filing for bankruptcy was shameful or a sign of a financially irresponsible person or couple. An expensive medical situation a responsible person handles in the best possible way can land him or her in huge medical debt.
Medical debt is the leading cause of bankruptcy
As reported by USA Today, the Kaiser Family Foundation reports that the leading cause of personal bankruptcies is unpaid medical bills that turn into large debts. In 2014, about four out of 10 Americans incurred debt from a medical problem.
One might expect that this would primarily be a problem for the uninsured. However, Kaiser notes that of the 25 percent of Americans who have difficulty paying medical bills, among them are those who buy health insurance independently and those who receive group health insurance through their jobs.
Many try to solve the problem by using savings or retirement to pay debt, or by getting an additional part-time job. With today’s high-deductible medical insurance policies and those with high co-pays and coinsurance, CNBC confirms that having health insurance is not insurance against huge medical debt.
Medical debt leads to other debt and skimping on necessities
In fact, medical debt often causes substantial credit card debt. Millions of people use credit cards to cover growing medical bills and buy themselves time. The high credit card interest then causes the credit card debt to grow, and often it becomes insurmountable.
Thus, a bankruptcy that includes a lot of credit card debt may, in reality, be a medical debt bankruptcy. It may also be ironic that many people skimp on prescriptions or even more expensive healthier food to attempt to pay at least something towards their medical debt.
Personal bankruptcy can be the most effective and legal method to get that fresh start without crushing medical debt. It creates a beginning point to gain back one’s control and choices in life.
When Mississippi residents feel the burdensome strain of large debt and monthly payments relative to their financial wherewithal, the thought of bankruptcy may cross their minds. Some, in fact, get the fleeting thought and then dismiss it immediately.
The fear of having to liquidate their assets is too much to bear. However, it need not be worrisome at all for many.
Mississippi exempt assets not subject to liquidation
As stated by the Mississippi Bar Association, there are many assets that are exempt from liquidation. Such assets include $10,000 worth of personal property, such as a car or household items. Insurance payments on exempt property are also exempt. If a person is receiving disability insurance benefits, these too may be exempt, as may be pension or retirement benefits.
The home may be exempt up to $75,000 in equity beyond the mortgage balance. However, although one can keep the house, the debtor will need to keep paying that mortgage. The filing debtor of a Chapter 7 bankruptcy can also keep his or her car so long as he or she makes those car payments timely. Personal injury awards are also exempt up to $10,000, as may be workers’ compensation awards.
Personal property exemption
The $10,000 exemption in personal property does not mean determining how much it would cost to replace the item. It is not the cost of buying a new item. Rather, the figure used is the fair market value of the used item. What dollar amount can that used item bring in if sold? When using that latter definition, $10,000 may cover a lot of personal property. Also, when figuring out the car value, it is the value of the car minus the balance of the car loan to determine the equity counted towards that $10,000 limit. If the car market value is $15,000, and the owner owes $10,000 on the loan, the countable equity is only $5,000. Of the $10,000 exempt limit, saving the car would still leave $5,000 of other personal property.
In fact, many people eligible for Chapter 7 do not have any non-exempt assets. Many may already have sold valuable property to make ends meet prior to considering bankruptcy. Others just never got far enough ahead financially to gain exempt assets. This reality may make filing for Chapter 7 a relatively simple matter. It can lead to a future of financial relief and ability to live without the constant feeling of treading water.