Mississippi residents who have had health emergencies likely can appreciate that medical bills are a factor in approximately two-thirds of all bankruptcy filings across the country. A study that contained this information was published in the American Journal of Public Health on Feb. 6.
For the study, a research team surveyed 910 random U.S. citizens who filed for personal bankruptcy between 2013 and 2016. They found that medical expenses ruin the finances of around 530,000 American families every year. They also found that around 66.5 percent of all bankruptcy filings were at least partially attributed to unpaid medical bills. The study is the first to explore the association between bankruptcy and medical bills since Congress passed the Affordable Care Act nearly nine years ago.
According to the lead author of the study, who is on the faculty at both the Harvard Medical School and the City University of New York’s Hunter College, the findings show that most Americans could be forced into the poorhouse after suffering just one major illness. He also said that health insurance provides inadequate protection because of co-payments, deductibles and other loopholes that push health costs back onto patients. The authors concluded that, while bankruptcy can help bail people out, the best long-term solution would involve changing the way Americans pay for health care.
Individuals who face overwhelming medical bills and other types of debt could help themselves by consulting with a bankruptcy attorney about their situation. The attorney could carefully assess the details of the case and suggest ways to stop creditor harassment and obtain debt relief. One possible solution could be to file a Chapter 7 bankruptcy petition, which could lead to the discharge of several types of unsecured obligations.
In most circumstances, it is not possible to discharge student loans through bankruptcy. However, some Mississippi debtors may be able to discharge them if a few factors are in place. These rules apply to both private and federal loans.
The borrower must be able to demonstrate that repaying the loans will lead to “undue hardship”. What constitutes undue hardship has never been defined by Congress, but nearly all federal circuit courts use a standard called the Brunner test. The Brunner test requires that there be extenuating circumstances and that extreme hardship will result from paying back the loan that will not allow the person to keep up a minimum living standard. It also requires that the circumstances are unlikely to change for the term of the loan and that the person has made an effort to repay the loan. This does not necessarily mean the person has already made one or more payments. It can mean that the person has attempted to set up a payment plan or taken other steps. The 8th Circuit uses a similar standard while the 1st Circuit does not have a set standard.
There are alternatives to trying to discharge these loans in bankruptcy. A person might be eligible for income-driven replacement. Paying off other debt or getting a loan with a lower interest rate could also help.
A person who is struggling to pay student loans or other obligations might want to talk to an attorney about the types of debt relief that might be available. If the debtor’s income is below a certain level, Chapter 7 bankruptcy might be a possibility. Getting rid of credit card debt could allow the person to pay off student loans or other debts that cannot be discharged, such as child support.
Various problems, like job loss, a medical crisis or a death in the family, could motivate Mississippi consumers to pursue bankruptcy when their income cannot keep up with debt payments. About two-thirds of the non-business bankruptcies filed by individuals fall under Chapter 7 bankruptcy rules. A Chapter 7 bankruptcy requires the sale of assets to recover money for creditors before a judge typically discharges remaining debts. Certain assets are usually exempt from liquidation, like the family home, but the mortgage on the family home might still remain a burden if not included in a bankruptcy.
About one-quarter of Chapter 7 bankruptcies involve real estate mortgages that have not been paid for 120 days. Often these properties qualify for the homestead exemption, and borrowers choose to apply the exemption. They hope to save the home after bringing their other debts under control, but this choice removes the home mortgage from the bankruptcy process and sometimes leaves them exposed to foreclosure if they still cannot make payments.
In some cases, a lender has already initiated a foreclosure action when the borrower files for bankruptcy. Borrowers might still choose to ask the court to remove the mortgage from consideration because they hope to avoid the complications involved in selling the property under the supervision of a trustee. This decision, however, might still leave a borrower exposed to the negative effects of foreclosure, like a bad credit history.
A person concerned about mounting debts that threaten to cause foreclosure or wage garnishment could learn about legal options for debt management from an attorney. An evaluation of debts and income by an attorney could reveal that the person qualifies for fling under Chapter 7.
Anyone in Mississippi or any other state must wait for eight years before filing for Chapter 7 bankruptcy again. This means it’s not possible to file for this same type of bankruptcy, which is popular because it wipes out most debt within months of the initial filing and approval, until the eight year period is up. Technically, there aren’t limits on how many bankruptcy cases someone can file, but there are limitations on when this type of protection can be sought after a previous bankruptcy was successfully filed and completed.
With Chapter 7, the eight-year limit between filings is pretty much set in stone. If a debt holder wishes to go from Chapter 7 to Chapter 13, however, it’s possible to file for Chapter 13 bankruptcy after Chapter 7 is discharged. The stipulation is that four years from the initial Chapter 7 filing date must have passed first. Going from Chapter 13 to Chapter 7 requires a six-year wait after a Chapter 13 debt is discharged.
However, it is possible for a debtor that started off with Chapter 13 to file for Chapter 7 earlier if they’ve paid off 70 to 100 percent of their unsecured debt. The debtor must also prove they’ve made their best effort to stick to their repayment plan. In some instances, the court may extend the period that another bankruptcy can be filed by an individual if a previous bankruptcy was “dismissed” but not “discharged.” A court may also issue what’s termed a 180-bar to prevent refiling if a debtor fails to follow court orders or commits bankruptcy fraud.
An attorney generally recommends that debtors consider a fresh financial start with bankruptcy only as a last resort. If a Chapter 7 filing was already completed and debt issues still exist, a lawyer may suggest considering Chapter 13 if a client isn’t able to wait eight years to file for Chapter 7 again. An attorney may also be able to help a debtor in the middle of a Chapter 13 bankruptcy convert to Chapter 7 if they aren’t able to keep up with the repayment plan.
At the end of March 2018, there was a total of $1.4 trillion in student loan debt, according to the New York Fed. Across America, there are 44 million people – many of whom live in Mississippi – who have student loan debt, and it is highly unlikely that it can be discharged according to current bankruptcy laws. However, there is support for new rules that may make it easier to get rid of this type of an obligation in a bankruptcy proceeding.
Under proposed legislation, the definition of undue hardship would be broadened. To have student loan debt discharged, the borrower must show that being required to make payments would constitute an undue hardship. The Department of Education has asked for public comment about this issue as it believes that current rules are discouraging some debtors from filing for bankruptcy. There is no set definition of what an undue hardship is, which means that criteria are applied on a case-by-case basis.
Generally speaking, a person must pass the Brunner test to determine if he or she faces an undue hardship. To pass, an individual must show that paying the debt precludes him or her from maintaining a basic lifestyle for the next several years. The applicant must also show that an effort was made to make student loan payments prior to filing for bankruptcy.
Those who are experiencing overwhelming debt that can’t be repaid quickly may benefit from filing for bankruptcy. Doing so may allow a person to get a stay from creditor collection calls and letters. It may also make it possible to have student loan or other debts discharged in part or in full.
