Bridgeport Law Blog

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.

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.

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.

When people in Connecticut are dealing with piles of unpayable bills or aggressive collection calls, they may be looking for a solution that allows them to obtain some debt relief. Bankruptcy can provide people with a new start that enables them to escape a mountain of debt. There are some credit consequences, but many people who turn to bankruptcy have already suffered serious hits to their credit. However, there are different types of personal bankruptcy. Each may be appropriate for people in different situations.

Chapter 7 bankruptcy is perhaps the best-known type of personal bankruptcy. Known as a liquidation bankruptcy, a filer's unsecured debts are eliminated and assets sold off to pay a portion of the creditors. The process lasts around three to six months before the bankruptcy is completed. However, only people who make an amount of money equal to or less than the median income in their state are eligible for Chapter 7 bankruptcy. People with high-paying jobs and large debts may find that this option is not available to them. Others may want to retain certain types of property, such as a family home, that would be sold off. Chapter 13 bankruptcy may be an option for both.