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Is Chapter 7 an option when medical bills are making you sick?

Medical treatment is expensive. Even for minor injuries and illnesses, health care can come at a great cost. Connecticut readers know that even with a good insurance plan, a major accident or prolonged illness can wipe out savings and leave a family in extreme debt. Medical bills can quickly outpace your ability to pay, eventually leading to financial trouble and significant stress. However, Chapter 7 bankruptcy may be an option. 

Whether you needed emergency medical care, dental work or found yourself very ill and in the hospital, your recovery could come at a significant cost. Testing, lab work and even just paying your co-pay can be exorbitant. Many people struggle with medical debt, and for some, it can become a major financial struggle. Eventually, unpaid medical debt may end up in collections. 

Chapter 7 may be just the ticket to restored financial stability

Connecticut is not immune to economic downswings from time to time, just as most other states in the nation have experienced. When an individual resident or a business owner comes upon difficult financial times, it may be challenging to figure out the most viable option to rectify the problem. What works in one set of circumstances may not even be possible in another; for instance, some people are not eligible for Chapter 7 bankruptcy while others are.

There are several types of bankruptcy, and one or more may be feasible in a particular situation. Most individuals filing for personal bankruptcy choose Chapter 7 or Chapter 13.  The latter includes a reorganization of debt plan and a restructuring of payments. The key factor here is that the person filing for debt relief with this type of option retains his or her own assets.

Debt settlement versus Chapter 7 bankruptcy

In cases where an individual or company is facing overwhelming debt, several options are available. In some cases, a Connecticut resident might be offered the opportunity for debt settlement, a process wherein the creditor agrees to forgive portions of the debt in exchange for a mandated payment schedule. While this can have its benefits, it does not preclude Chapter 7 bankruptcy as an option for those who are unable to meet these requirements. 

Once upon a time, some creditors would use debt settlement as a way of selling off the excess debt to a collections agency, meaning the debtor would still be required to pay back the full amount between two different organizations. This is less common today, and when offered debt settlement solutions, some individuals may find it beneficial to take that opportunity. This is not true if the debtor is unable to meet the minimum payment requirements. 

Two construction companies file for Chapter 7 bankruptcy

Two construction companies that have been struggling financially for some time have filed for bankruptcy, according to business news. Both companies filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in the month of August. Connecticut business owners will recognize this as being an intelligent and prescient financial move on the part of both businesses, as Chapter 7 bankruptcy can help to ease the burden of debt for struggling companies. 

According to reports, the first company filed on Aug. 28 after listing nearly $2.6 million in debts against $673,000 in assets. These assets are largely tied to a claim they filed against a contractor back in 2016. The bulk of the company's liabilities stem from a disputed performance bond claim worth some $1.8 million. 

Appliance store files for Chapter 7

A popular appliance store has closed its doors, according to business news sources. Prestige Appliance, based in another state, filed for Chapter 7 bankruptcy on Sept. 7 in a United States Bankruptcy Court. As some Connecticut residents are aware, this move is meant to free the business owners from the constraint of a company's accrued debt and use its assets to pay down creditors. 

Prestige opened back in 2009, focusing on the service and sale of major appliance brands. The business model did not put the company in direct competition with big box retailers, but regardless, both of its locations (one of which opened only last year) have now closed down. It is unclear how much notice employees and customers were given before owners made this move. 

Chapter 7 bankruptcy vs. debt settlement company

Falling behind on the bills is not a pleasant feeling. In fact, it may seem as if the debt will smother the borrower, making it difficult to sleep or affecting one's ability to relate with loved ones. When overdue debt reaches the point where creditors are calling, accounts are in the hands of collectors and credit scores are damaged, a Connecticut borrower may reach out in desperation. While Chapter 7 bankruptcy may be an option, some may try other methods of debt relief that may only make matters worse.

Debt settlement companies, for example, seem to offer a solution. However, in many cases, the borrow finds the situation becomes even worse. For one thing, debt settlement companies instruct borrowers to stop making payments on their debts and instead send a monthly deposit into the settlement company's account. Only after the borrower has deposited an adequate amount of money will the settlement company begin negotiations with creditors.

Chapter 7 can provide a fresh start within months

Life can be full of unanticipated twist and turns, some of which can be extremely challenging. Some Connecticut consumers may not realize that circumstances can drive them into situations that force them to consider filing for Chapter 7 bankruptcy. It is important to understand that such a step is a reflection of the situation rather than a reflection of the individual.

One example is a 60-year-old man who was divorced and relying on social security disability payments as sole income. However, after suffering a heart attack in 2015, he waited nine months before disability payments started. He used half of his life savings and incurred credit card debt to support himself during that time. Now he sits, with almost $8,000 of credit card debt and an insignificant income, seeking a solution to his dilemma.

Chapter 13 bankruptcy and the benefits of the automatic stay

Many individuals in Connecticut and across the country have suffered through periods of significant financial burdens. The constant phone calls and collection letters that accompany overwhelming debt can add a great deal of stress to an already difficult situation, prompting some to explore the available options for relief. Those in search of protection from creditors may find it advisable to consider the potential benefits of filing for Chapter 13 bankruptcy, such as the automatic stay.

Upon filing for Chapter 13 bankruptcy, the automatic stay may kick in and provide an individual with protection from creditors. This may help relieve a substantial amount of stress while an individual forms a plan to repay a certain amount of his or her debts over a given period. In addition to bringing the phone calls and letters to a halt, there are numerous other areas in which the stay may also prove beneficial.

Knowing what to expect with Chapter 13 bankruptcy

Filing for bankruptcy is rarely a decision that is made lightly. In fact, someone who is struggling with overwhelming debt because of a divorce, medical expenses or other financial setback may have tried many other options to regain financial footing before deciding to investigate bankruptcy. Some in Connecticut may seek Chapter 7, which discharges some (and sometimes all) debts through the liquidation of nonexempt assets. However, those who have a steady income or otherwise do not qualify for this type of debt relief may find Chapter 13 works for them.

The unfortunate truth is that about two thirds of those who begin the process of bankruptcy through Chapter 13 do not finish and may find themselves in a worse situation than when they began. However, in many cases, this is because they did not fully understand what was expected of them during the process. In Chapter 13, the filer must propose for court approval a plan to repay certain debts through a bankruptcy trustee. The filer makes monthly payments to the trustee who distributes the payments to creditors according to the court-approved debt reorganization plan.

Payday loans do not provide debt relief

It is not uncommon for people in Connecticut to find themselves short of cash with days to go before the next paycheck. Whether it happens because of poor planning or unforeseen circumstances, it is never a pleasant feeling. In fact, it may bring a sense of panic if there are bills left unpaid and necessities to purchase. While it may seem like temporary debt relief is better than none, some find themselves digging deeper into debt by using quick fix loans in times of desperation.

Actually, payday loans capitalize precisely on that feeling of desperation. Lenders provide small amounts of money for short periods of time with little-to-no credit check. The borrower merely signs a contract agreeing to repay the money at a certain time, usually within a month or less. The borrower may be required to leave a post-dated check or provide the lender with access to a checking account to electronically withdraw the money.