If you are drowning in debt and your self-esteem and motivation are at their lowest, you are not alone. The truth is, facing unpayable debts can be a terrifying and stressful experience for many people. Anxiety and depression are common.
Despite everyone’s constitutional right to file for bankruptcy, there are still many lingering myths and stigmas that can keep debtors down throughout the process. To help overcome these feelings, it can be helpful to shift your perspective on things.
There are many reasons why a person might have debt. While some reasons might reflect personal choices like poor money management, others do not. For example, significant consumer debt in the U.S. reflects medical emergencies. Regardless, your reasons for debt do not define your worth.
At the end of the day, bankruptcy is one of your constitutional protections. It protects you, the consumer, not the creditors to whom you owe money. When you think about the logic of the situation, it makes sense why they would not encourage you to file; it is not in their favor.
For consumers who are considering bankruptcy, debt can feel crushing. Sometimes, it can feel like failing. While you may be struggling right now, filing for bankruptcy can give you the opportunity to both start over as well as increase your knowledge about personal finances and budgeting.
Undeniably, facing bankruptcy can be challenging, but changing your perspective can end up changing your entire situation.
A financial situation leading to bankruptcy could happen to any household faced with unexpected medical costs or a sudden loss of income. Whether used to seek relief from overwhelming consumer debts or to stave off foreclosure, bankruptcy may offer a workable path forward.
Health care debt is a common cause of bankruptcy; as noted by the American Journal of Public Health, medical bills contributed to nearly 67% of American bankruptcies in 2019. The U.S. Census Bureau reported that 19% of American households were unable to pay their medical bills in 2017. Households with children or residing in southern states were more likely to experience unmanageable medical debt.
Although many employers provide health insurance, out-of-pocket expenses and co-pays add up quickly. If an individual needs time off to recover or care for an ill family member, the loss of income could have a significantly negative effect on a household’s ability to manage a budget.
Financial hardships generally begin when a household can no longer meet its normal monthly expenses. While attempting to cover basic necessities, the overwhelming burden could take a painful toll on a family’s emotional and mental well-being.
As described in an opinion article in The Chattanoogan.com submitted by a U.S. district judge, the bankruptcy court acts as a “court of second chances” for individuals faced with unmanageable debts. Individuals often file petitions because of an economic downturn or financial issues they had no control over.
Many debtors begin to consider bankruptcy for relief after receiving phone calls and letters from collection agents threatening legal action. Filing a petition may stop collection activity and qualify for a discharge of unpaid consumer debts including medical bills.
Falling ill or facing an injury may leave you strapped for cash. If you are unable to work, you may sink further and further into debt. Bankruptcy may prove the best way to relieve some of the stress debt causes.
What happens to the medical debt during bankruptcy? The good news is that, like most unsecured debts, medical bills are available for discharge. Depending on the route you take through the process, the way the court handles it varies.
Chapter 7 bankruptcy involves liquidating certain assets to pay a portion of your debts. A court-appointed trustee will place your creditors in line to receive payment after this liquidation. Secured debts are those things with collateral attached, such as your home. Unless you want out of your mortgage, you will likely retain your home even during liquidation. After secured debts come those that do not have collateral. These unsecured debts include credit cards and medical bills. If you follow the terms set forth by the trustee, the judge will discharge your unsecured debts if there is not enough money to pay them. This includes your medical bills.
Chapter 13 bankruptcy does involve the discharge of unsecured debts, but it also requires repayment of a portion of the debt. The hallmark of Chapter 13 bankruptcy is a repayment plan that fits with your income. The trustee gathers your debts, looks at your income, and gives you one monthly payment to make for a period not to exceed five years. After you make the requisite payments, the judge will discharge the remaining debts, including medical bills.
Bankruptcy may provide you a way to get out from under the medical bills that put you in debt in the first place.
Bankruptcy is a valuable tool provided by the government to grant individuals like you the chance for a fresh start. Chapter 7 bankruptcy is one of the options available to consumers and involves the sale of your nonexempt property to pay off debts. The other alternative, Chapter 13 bankruptcy, involves the development of a repayment plan instead.
Both of these require you to attend a 341 meeting, or creditors’ meeting. This is a meeting with your bankruptcy trustee, your legal representative if you choose to have one and your creditors (in some cases). While this may seem like a scary prospect, it is usually simple and often short, sometimes ending in under five minutes.
The 341 meeting is just the process of making sure all of the necessary information is right, trying to spot out possible estate administration problems and identifying nonexempt property. The goal is for the trustee to review the details and check their accuracy. It is not a court hearing, and, in spite of its name, your creditors may not even be there. The meeting is not for them to pressure you. In most cases, they opt out since it is basically an information session.
Your bankruptcy trustee puts you under oath to be honest and verifies your identity by asking to see your photo ID and a document showing your social security number. Said trustee then asks you required questions and may ask some discretionary questions. These may be about nonexempt assets (for Chapter 7), repayment plan setup (for Chapter 13), income, child support, spousal support or other factors.
The idea of a 341 meeting is intimidating to many. However, as long as you answer all questions truthfully, it usually is not as bad as you may think.
Bankruptcy allows you to wipe your debt clean to start over. It can help you rebuild your credit and learn to manage your money wisely.
There are also benefits to be had during the bankruptcy process.
Once you file for bankruptcy, the courts send an order to all your creditors preventing them from starting or continuing to take action to collect debts. It suspends the proceedings until the completion of the bankruptcy process.
The automatic stay, however, does not have the power to stop:
Filing for bankruptcy a second time in the same year may give you the option of requesting an extension of the first automatic stay.
Bankruptcy gives you the ability to discharge debts to give you a fresh start. The discharge releases you from liability for the debt and keeps the creditors from going after you. Most Chapter 7 filers get the discharge after the completion of the bankruptcy process.
If you file a Chapter 13 bankruptcy, a discharge is not as easy to get. The courts may allow you to discharge non-priority unsecured debts. Some of these include credit card balances, personal loans and medical bills.
Bankruptcy law allows you to keep all or part of your property away from creditors. These exemptions may include your home, furniture and items you use for business.
Neither Mississippi nor Tennessee allows you to choose to take federal exemptions.
Bankruptcy is a means for you to begin again financially. Take the time to look over how the process can work for you.
