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Chapter 7 bankruptcy could help people with serious medical debt

Medical bills are one of the most common types of debt carried by Connecticut consumers, and for many, it can be overwhelming. One medical emergency, broken bone or extended illness, and families could find themselves facing a debt burden they can never hope to manage on their own. In some situations, medical debt is a good reason to move forward with a Chapter 7 bankruptcy filing. 

Many Americans find themselves facing medical bills they did not expect. In one case, a women got a large bill after an emergency surgery, even though the hospital accepted her insurance. It turned out that the doctor who performed the surgery did not. As a result of not paying the bill, there is now a lien against her home, and she is being docked a quarter of her paycheck until the debt is paid.

Personal bankruptcy is hard for disabled veterans

Disability benefits play an important role in many people's finances, helping them to stay afloat even when they might be struggling with money and bills. In most cases, filing for personal bankruptcy will not affect a person's ability to continue receiving disability benefits. For Connecticut veterans this is not always the case.

Disability benefits -- including Social Security Disability benefits -- are not taxable, and under current bankruptcy laws this means they are not considered to be disposable income. This means that not only do they not count towards a person's general income, but they also cannot be seized for repaying debt collectors. This exemption does not apply to veterans disability benefits.

Can I use a personal loan for debt management?

Juggling multiple monthly payments for various debts can be more than just stressful -- it can be financially crippling. Personal bankruptcy can be an effective debt management solution for Connecticut consumers who can no longer keep up with their monthly payments, but some people are trying a different route first. Personal loans for debt consolidation are becoming an increasingly popular choice.

In 2018, personal loan debt grew more than debt for credit cards, auto loans and all other types of consumer debts. There are currently more than 36 million outstanding personal loans in the United States, and the average balance sits at $15,143. The average can fluctuate depending on the age group, with baby boomers shouldering the largest balances at about $19,403. Generation Z owes the least in personal loans, and that generation's average balance comes out to $5,941.

Can personal bankruptcy help with my student loan debt?

It is not secret that the cost of college is far outside of the reach of an average Connecticut student. Even with scholarships and grants, few can afford to fork out fistfuls of cash for their classes. With ever-growing class loads, working more than part time during college years is also difficult if not impossible for some. These and other factors have culminated into a growing crisis for young adults, which personal bankruptcy could be one option for addressing.

Debts levels for young adults between the ages of 19 and 29 recently topped out at $1 trillion. This is the highest level of debt this age group has shouldered since back in 2007 when America was in the throes of the Great Recession. The burden of this debt shows, too. According to a university study, debt impacts how these young adults view their own spending habits. Adults under the age of 35 have drastically reduced their spending habits compared with past generations.

Is personal bankruptcy or debt consolidation better?

Balancing multiple monthly payments is a juggling act that most people in Connecticut cannot keep up with forever. In some situations, debt consolidation can help individuals create more manageable payment schedules that get them back on financial track. When this is not possible, personal bankruptcy may be a more effective option for relief.

It is surprisingly easy for the average consumer to discover that they have built up quite a bit of credit card debt. When this debt is spread across multiple cards with different monthly payments, repayment can begin to feel impossible. Rather than scrambling to make each month's minimum payments, some consumers choose to take out a personal loan which they then use to pay off all of their credit cards. After that, all they have to do is focus on a single, monthly payment for the personal loan.

Who is most at risk for personal bankruptcy over credit cards?

Credit card debt might feel like an unavoidable feature of modern life, and rising balances seem to support this idea. Consumers in Connecticut and across the rest of the United States seem increasingly willing to take on more and more debt on their credit cards, with the current average debt for individuals at $5,331. So are those with more debt in worse shape and more likely to file for personal bankruptcy than those who owe less? Maybe, but maybe not.

Average credit card debt varies depending on several different factors, with two main contributing factors being age and income levels. The group with the highest individual average -- $9,096 -- includes those between the ages of 45 and 54. For a comparison, consumers over the age of 75 only owe an average of $5,638. However, this points back to the second factor -- income. Retirees generally owe less on their credit cards because they are living on fixed incomes.

Medical debt frequent cause of personal bankruptcy

Connecticut job seekers prioritize several different factors when looking for work. From looking for certain base salaries to commuting distances, one of the biggest considerations is often employer-offered health insurance. Unfortunately, even securing a decent health insurance policy can't fully immunize a person to falling into medical debt, which is a significant contributor to personal bankruptcy.

Many people banked a significant amount of hope in the passage of the Affordable Care Act, which was supposed to help solve many of the issues associated with for-profit health care. A recent study from the Consumer Bankruptcy Project found that despite the program's best efforts, this was not the case. The ACA was passed back in 2010, and 66.5 percent of bankruptcies filed between 2013 and 2016 were attributed to medical issues. These bankruptcies were either directly related to unaffordable medical bills or loss of income because of illness.

Key differences between Chapter 7 and Chapter 13 bankruptcy

Filing for bankruptcy can be an essential lifeline for Connecticut consumers who are drowning in debt. However, deciding to file for bankruptcy is not quite as simple as filing a piece of paper and then going from there. Before any of that can take place, individuals must decide whether they will pursue Chapter 7 or Chapter 13 bankruptcy.

In some cases, the decision regarding which bankruptcy to pursue will be made for the filer. If a person's income falls above the state's average income, then they do not qualify for Chapter 7 and must instead use Chapter 13. But what if a person qualifies for Chapter 7 but is curious about the possible benefits of Chapter 13? There are a few key differences that people should keep in mind, particularly when it comes to how debt is discharged and which assets a person may keep.

Do student loan borrowers need debt relief?

Debt involves so much more than simply owing money. For many people in Connecticut, debt is a source of frequent worry and an obstacle that prevents them from moving forward in life. From enjoying little things like dinner out with friends to making big life steps such as buying a home, sometimes it simply gets to be too much. Securing the right kind of debt relief can help some of these individuals not just get a better grip on their finances, but also better enjoy their lives.

With 44 million people currently owing a collective $1.5 trillion in student loans, the problem has been labeled a crisis. Student loans are the second biggest type of consumer debt, coming in behind mortgages but ahead of auto loans and credit card balances. The average 2017 college student graduated $40,000 in debt, and experts predict that 40 percent of borrowers will default on their loans by 2023.

Foreclosure rates are low, but you could still be struggling

For Connecticut homeowners, there may be few things more terrifying than the prospect of losing their home. However, recent data indicates that homeowners across the nation may be better equipped to handle their current mortgages and are overall less likely to end up in foreclosure . Delinquency rates -- which include foreclosure -- recently hit their lowest point since 2001.

Falling behind on mortgage payments is usually one of the first steps toward foreclosure, but current delinquency rates are hovering around 4.1 percent. This is a significant reduction in delinquency rates not just from the housing crisis during the early 2000s, but even from in recent years. In Oct. 2017 delinquency rates were as high as 5.1 percent.

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