Debtors who are thinking about bankruptcy will generally choose between filing for Chapter 7 or Chapter 13 protection. Connecticut residents who want to pursue a Chapter 7 case will need to take a means test to verify that they cannot repay their debts. If an applicant passes a means test, assets will be liquidated with any money raised going to repay creditors.
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.
For many people in Connecticut, it is very difficult to pay off their credit card bills on a monthly basis. With high interest rates, people may find that their balances continue to rise. This can be especially true for people who have suffered a financial change since they first began to accumulate credit card debt.
The Consumer Financial Protection Bureau reports that more than 70 million people nationwide have at one time or another had to deal with debt collectors. Around one-quarter of people said they felt threatened by the collection agency during their interactions. In such situations, it can seem like the creditors have all the power, but there are things people in Connecticut can do to respond to debt collection actions.
Some Connecticut consumers may be among the more than 20% who say they do not know whether or not they have credit card debt. An online survey of over 1,000 consumers by U.S. News & World Report also found that almost one-quarter of respondents had over $10,000 in credit card debt. Another quarter said they kept a revolving balance of around $2,000.
Once known for their cautiousness with being burdened by financial obligations, millennials and their younger Gen Z counterparts in Connecticut and elsewhere in the U.S. are accumulating more debt. Some of this debt is student loan debt, which can be a "good" kind of debt since interest rates are usually low. It's the rise in credit card debt among younger generations that's especially worrisome.
Many Connecticut residents are struggling with high levels of medical debt. It may seem nearly impossible to pay off expensive health care bills. In fact, around 30% of all Americans have over $500 in unpaid medical debt. Medical debt, like other kinds of debt, can have an effect on one's credit score. This means that unpaid medical bills can also lead to challenges when buying car insurance, renting an apartment or seeking a loan.
Many different types of debts can be discharged in a bankruptcy. However, student loan borrowers in Connecticut may not be able to get their debts cancelled through this process. That is because lawmakers in previous decades felt that students would try to get out of paying their loans by discharging them after graduation. To get a student loan erased in bankruptcy, a borrower needs to show that he or she cannot keep paying because of an undue hardship.
Many Connecticut consumers know that a bankruptcy stays on a filer's credit report for a long period of time. This is one reason why even people with overwhelming debt continue to resist filing. They are concerned that they will never be able to access credit again and that their credit reports will lead to disaster. Of course, one of the problems is that most people who file for bankruptcy already have significantly damaged credit. They may show very high utilization of existing credit lines, late payments, unpaid bills, or even judgments.
Many people living in Connecticut rely to some degree on credit. Of course, this is isn't unusual as Americans typically maintain a high level of credit card debt. As of February 2019, the amount of revolving credit debt in the United States was $35.4 billion, according to the Federal Reserve. Overall, the increase in consumer credit overall was less than expected.