When you file for bankruptcy, you activate an automatic stay, which puts a halt to creditor harassment.
There is even more to the implementation of an automatic stay that should allow you to sleep better at night. However, it cannot solve every problem.
Perhaps a gas, electric or water company threatens to cut off your service because you are behind on payments. An automatic stay can prevent disconnection, usually for 20 days or more.
If you are a homeowner and behind on your mortgage payments, the stay will stop foreclosure, at least until your bank finds a way to continue the process. If your landlord is threatening to evict you, the automatic stay will buy you a little more time to remain in your home. Keep in mind, however, that courts often favor the landlord in disputes with tenants and a court case once instituted is likely to continue.
After you file for bankruptcy protection, an automatic stay will put an end to wage garnishment until the stay is lifted.
There are certain situations an automatic stay cannot control. For example, it will not prevent the Internal Revenue Service from auditing you or from issuing a tax assessment. However, the automatic stay will prevent the IRS from placing a tax lien against your property. Also, the stay will not help if you owe child support payments. If you are dealing with a criminal proceeding, part of which also concerns a debt you owe, the automatic stay will stop the debt, but the criminal portion will continue.
If you have been struggling to pay for everyday items recently, it may not surprise you that prices have increased. In fact, the U.S. Bureau of Labor Statistics consumer price index shows a 5.4% jump in prices in the last year alone. This may leave you with little choice but to reach for your credit cards to make ends meet.
Credit card debt can sneak up on you quickly. If you have excessive debt or can only make the minimum payments on your cards, you may be looking for debt-relief options. Fortunately, with both Chapter 7 and Chapter 13 bankruptcy filings, you can probably discharge most or all of your credit card debt.
With Chapter 7 bankruptcy, you disclose all your assets and debts to the bankruptcy trustee. The trustee may then sell some of your assets to pay your creditors. There are many exemptions, though, so you are not likely to lose everything. Then, you no longer have to pay debts that qualify for discharge. Unsecured debts, like credit card balances, unusually fall into this category.
Chapter 13 bankruptcy works differently than Chapter 7 bankruptcy, as you and the bankruptcy trustee come up with a repayment plan for your outstanding debts. At the end of your repayment period, which may be three or five years, your remaining credit card debt is typically dischargeable. That is, once you complete your repayment plan, your qualifying credit card debt goes away.
There are many factors that influence whether your debt is dischargeable during bankruptcy. Ultimately, so nothing catches you by surprise, it is critical to explore all your legal and financial options before filing for either Chapter 7 or Chapter 13 bankruptcy protection.
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.
