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Russell G. Small

Bridgeport Law Blog

The rules for filing under Chapter 13

Connecticut consumers can file for Chapter 13 bankruptcy regardless of their income. However, they must have no more than $1,257,850 in secured debts and no more than $419,275 in unsecured debts at the time that they file. Those who are looking to file for Chapter 13 bankruptcy will also need to verify where their income comes from, and it will be necessary for a debtor to show that he or she has filed all necessary income tax returns for the past four years.

The first step in the Chapter 13 bankruptcy process is to take a credit counseling course from an approved provider. After completing that step, the next task is to create the repayment plan that will be used throughout the repayment period. In a reorganization bankruptcy, debts will be repaid for either three or five years depending on how much income a person has.

The difficulty of discharging student loans in bankruptcy

Some people in Connecticut may be struggling with substantial student loan debt. The total student loan debt nationwide is $1.59 trillion. Unfortunately, student loan debt is rarely dischargeable in bankruptcy.

There are a few options for debt relief, particularly for people who have federal student loans. Some people may be able to get a forbearance or have the loans deferred, which would allow them to take a break from paying them. Applying for an income-driven repayment plan is another option. These may not be available for a private student loan, but the lender might be willing to negotiate.

Credit cards not ideal for paying medical bills

Medical costs continue to rise, in Connecticut and across the country, and many people have been forced to take on or carry debt in order to afford necessary health care. There are ways that people can avoid putting medical bills on their credit cards or reduce the amounts that they need to charge. Among them are insurance options, paying down existing debts, payment plans and using cards as a last resort only.

High medical bills may be avoided by the use of insurance. While health insurance can be prohibitively expensive in some cases, there are options in the U.S. for people to purchase insurance at discounted rates. Some people do not buy insurance because they are in good health, but medical issues can crop up suddenly and leave the person with significant bills. Paying down other debts might help people avoid putting medical expenses on their credit cards. Paying the same amount in two payments, one earlier in the month, can reduce balances faster.

Tips for dealing with medical debt

People in Connecticut who are struggling with medical debt are not alone. They are among around 137 million people throughout the country who are in the same situation. Many of them are like one 59-year-old woman who lost her job in 2013 and could not keep up with her COBRA payments.

After becoming uninsured, she had several medical emergencies, including kidney stones and a broken leg. Her bills mounted. Surgery as a result of her broken leg was $60,000, and other invoices arrived with figures exceeding $19,000 and $36,000. She said she did not know how much she owed. She spent the $20,000 she had saved for retirement and said she was considering bankruptcy.

Older adults struggle with medical bills

Older adults in Connecticut could be at risk of bankruptcy because of medical debt. When people who are older file for bankruptcy as a result of medical bills, they have usually run out of savings. Many are either not working at all or working reduced hours, so their income is limited. In 1991, just 2% of bankruptcy filers were 65 and over compared to 12% now.

In addition, the number of people 55 to 64 who filed for bankruptcy in 2016 was up 66% compared to 1991. For people 65 to 74, there was an increase of 204%. Some of these people are in the situation of one 66-year-old retired handyman who said that because of multiple injuries, his could no longer keep up with his medical expenses and had to file for bankruptcy. He hoped to be able to work out a loan modification with his bank that would allow him to remain in his home of 40 years.

The statute of limitations for unpaid debts

Connecticut residents who have bills that they are unable to pay often deal with daily phone calls or letters from banks, credit card companies and debt collectors, but state law places strict limits on how long creditors can pursue unpaid debts in court. The statute of limitations for unpaid debts is six years in Connecticut, but consumers who are struggling with unmanageable financial situations are sometimes confused about this timeline and when the clock starts to run.

The six-year statute of limitations for unpaid debts begins to run when the debt goes into default, but it resets when a payment is made. This means that if a Connecticut consumer makes a payment on an unpaid debt five years after it became delinquent, the six years allowed under the statute of limitations would begin all over again. Once the time allowed under the statute of limitations has passed, creditors or bill collectors are no longer able to take legal action against borrowers. However, they may still seek payment.

Determining if bankruptcy is the right choice

New Jersey consumers who are in debt have several options to reduce or eliminate it. There are many factors that may influence which tools they use to reduce the amount that they owe to creditors. For instance, those who make $100,000 a year may be able to commit to paying creditors in full without the need for a debt settlement or bankruptcy. Those who have a limited income may want to pursue a Chapter 7 bankruptcy.

One primary advantage of Chapter 7 bankruptcy compared to a debt settlement is that any amounts that are forgiven in bankruptcy will not be considered taxable income. It is also important to consider that there is no guarantee that creditors will work with debtors to forgive some or all of their debts. Even if a deal can be reached, the terms of the deal will likely be slanted in favor of a creditor.

How bankruptcy can affect a credit report

Many people in Connecticut are struggling to make ends meet. They may suffer significant credit problems as well as collector calls and ongoing harassment when dealing with substantial amounts of unrepayable debt. While personal bankruptcy can offer a path to relief, many may be hesitant to take the step to file because they are concerned about the effects on their credit reports. People who are unable to pay their bills may already be suffering from bad credit scores, and the effects of bankruptcy can be different depending on each person's situation.

The most common form of personal bankruptcy is Chapter 7 bankruptcy. In this type of bankruptcy, most debts can be forgiven, including credit card debts, personal loans or medical costs. Chapter 7 bankruptcy is available for people who make approximately the median income or below, and it can remain on a person's credit report for 10 years. Depending on the filer's original credit score, Chapter 7 could make it drop by as much as 200 points. The drop may be less significant if the filer has already accumulated a string or late of non-payment records. When filing for Chapter 7 bankruptcy, people must liquidate most of their assets.

Many people struggle with mounting credit card debt

People in Connecticut and across the country are facing an increasing burden of credit card balances. According to a credit card debt study by WalletHub, Americans began 2019 owing over $1 trillion in credit card bills. In the second quarter of 2019, consumers nationwide accumulated $35.6 billion in credit card debt, a national record for a one-quarter increase in debt. Over the year to come, the study estimated that another $70 billion in debt would be accumulated. Connecticut ranked 26th in the country in terms of debt accumulated, falling roughly in the middle of the pack.

Still, many Connecticut residents are finding it difficult to make ends meet. Credit cards can be handy for urgent expenses like car repairs, home fixes or medical bills, but people may find themselves facing difficulties paying off the bills, especially as interest expenses add up. The larger a credit card bill, the longer it takes to pay it off, which could then lead to even bigger interest payments. Around 39 million Americans have been in credit card debt for a minimum of two years, and many people have more debt than they do savings.

Disabled vets receive greater bankruptcy protections

Military veterans in Connecticut may be at particular risk for financial problems and challenges in their years after leaving the armed services. These challenges can be exacerbated for disabled veterans who rely on military benefits to pay the bills. Veterans may find themselves facing significant debt that they are unable to repay, and filing for bankruptcy can be an important way to seek relief. Around 15% of filers for both Chapter 7 and Chapter 13 personal bankruptcy are military veterans; however, veterans comprise only 10% of the overall population. In 2017 alone, around 125,000 American veterans filed for personal bankruptcy.

Disabled veterans often find themselves facing additional difficulties in the bankruptcy process. While Social Security Disability benefits are excluded from consideration of disposable income, many types of disability benefits provided by the Department of Veterans Affairs or the Department of Defense have not been excluded. To file for Chapter 7 bankruptcy, filers can only make below a certain income threshold. A debtor's disposable income is used to calculate a mandatory monthly payment for Chapter 13 bankruptcy. That's why disability payments have been within a creditor's reach during bankruptcy proceedings.

How can we help?

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When you are overwhelmed by debt, we can help you explore your options and find relief. Should you choose to file for bankruptcy, calls from creditors and debt collectors come to a stop almost immediately, allowing you to get back to living your life.

Call us today at 800-261-3275 or contact us online to schedule a consultation. Our firm offers evening and weekend appointments and home visits. Credit cards and payment plans are accepted. Se habla Español.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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