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Debt relief: Changes to credit reporting for medical bills

Health care costs have skyrocketed for the majority of Connecticut residents and others around the nation. Despite having insurance, most consumers realize they do not have adequate coverage to pay for treatment of a catastrophic illness or recovery from a serious injury. Many individuals wind up with mountains of medicals bills, significant balances and long-term financial obligations for which they must seek debt relief. However, some recent changes to the way information is sent and recorded on credit reports could alleviate some concerns.

Typically, if someone was hospitalized for an extended period of time, he or she was responsible for the amount of medical expenses not covered by insurance. Many people are unable to pay these balances and collection agencies would get involved. At this point, a person's credit score would suffer and thus affect their future potential to purchase a home or vehicles. A situation like this could take years to resolve, and unfortunately, the damage to one's financial situation is already done.

Understanding the process of Chapter 7 bankruptcy

Debt is one of the most challenging issues facing most American families. Here in Connecticut and elsewhere in the country, hundreds of thousands of families are facing insurmountable debt in the form of credit cards, medical expenses and more. Thankfully, a Chapter 7 bankruptcy filing can help to relieve that financial pressure by forgiving some debts and helping to repay others.

Chapter 7 is considered a liquidation bankruptcy, which means that assets can be categorized to be sold off in order to pay down creditors. This does not necessarily mean that the individual or family filing for bankruptcy will lose their home or vehicle, depending on the case. Some assets are considered exempt from the bankruptcy process, which means they will not be liquidated and can remain the property of the filer.

Court rules assets not protected in Chapter 7 bankruptcy case

Some Connecticut residents and others across the country have elected to file bankruptcy to confront overwhelming financial burdens responsibly and to get a fresh start on their finances. Many choose to file for Chapter 7 bankruptcy, where an individual's nonexempt assets are sold to pay creditors. There are certain assets that are determined to be protected and are not used for the payments to creditors. Recently, a dispute over what assets are protected occurred in one of the country's Bankruptcy Court of Appeals.

According to court records, a man had received the proceeds in his ex-wife's individual retirement account as well as half of her 401(k) balance in his divorce agreement. At the time of the divorce, the court had instructed the man to submit a QDRO, or qualified domestic relations order. However, the man failed to follow the court's instructions.

Credit cards useful, yet those who misuse often need debt relief

Credit card debt continues to be a major area of financial concern for Connecticut residents and others around the country. Many consumers have sought debt relief due to the overwhelming burden of debt from credit cards. Though they can lead to problems, experts still contend that credit cards can be useful, if used wisely, and are still an option for payment transactions.

Surveys show that most consumers choose to use cash when purchase amounts are lower. In fact, almost half of those surveyed indicated they pay with cash if a transaction is under $10.  Debit cards and credit cards were the alternative choices for payments. Those surveyed tended to use credit cards if a purchase was over $25, citing the desire to earn rewards points through their cards.

State senator suggests tying student loan debt relief to jobs

Many Connecticut residents and others around the nation are saddled with debt from student loans. Students frequently need funding to complete their educations and loans are often readily available. Unfortunately, it proves difficult for some to repay the loans after graduation while in entry-level jobs. A state senator in another state has suggested a way to provide debt relief to those struggling with student loan debt, while potentially boosting his area's economy.

This New England state senator recognizes that his jurisdiction has an aging population, with many residents either already retired or nearing retirement age. His concern is that his state will soon face shortages in the workforce since it is difficult attract and retain employees. The senator's recommendation is to offer incentives for individuals to come work in his state by relieving some of their student loan debt.

Will I have to sell off all my stuff in Chapter 7 bankruptcy?

Seeking debt relief through bankruptcy can be a difficult but positive experience for most people. However, individuals who file for Chapter 7 bankruptcy may worry about having to hand over all of their assets in order to satisfy their debts. While it is true that some property will be sold, people in Connecticut are often pleasantly surprised to find out just how much they will get to keep. 

The reason that some of a person's assets are sold is so that the resulting money can be applied toward existing debts before they are discharged. However, this only applies to non-exempt property. Non-exempt property typically includes family heirlooms, musical instruments, second vehicles, vacation homes and other non-essential items. 

How to decide what to file - Chapter 7 or Chapter 13?

Many Connecticut residents and others all across the nation are struggling with their finances. Despite an improving economy with lower unemployment, high levels of debt create a significant strain to a great number of families. Some consumers may decide that filing for bankruptcy is the decision that can help them start afresh and get their finances back in order. However, it may be difficult to determine whether to file for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 bankruptcy is focused on liquidating the consumer's nonexempt assets and paying off the debts. A means test must be passed by those who file for this type of bankruptcy, taking into account the income of the person filing. Types of assets that may be liquidated include cash, a home and car. This bankruptcy type is most appropriate for those consumers with little income or assets. A Chapter 7 bankruptcy can affect a credit score initially, and will stay on a credit report for up to 10 years.

Debt relief may be needed more for certain age groups

Excessive amounts of debt wreak havoc on the financial well-being of many Connecticut consumers and others who reside elsewhere. Recent reports show that certain age groups have incurred larger amounts of debt than others. Yet, regardless of age and demographic group, the burden of carrying a lot of debt may prompt some to seek debt relief in a variety of ways.

A national financial services organization recently published survey findings that showed older millennials -- those adults ages 24-34 -- have an average of $42,000 of personal debt. This is the highest level of any demographic reported. Those between the ages of 35 and 49 -- known as Generation X -- had the next highest amount at an average of $39,000. The lowest amount of personal debt was among young millennials -- those ages 18-24 -- at $22,000.

More seniors faced with filing Chapter 7 or Chapter 13 bankruptcy

As Connecticut residents or others around the country reach retirement age, many dream of spending time with their families, traveling, taking up a new hobby or embarking on a different career. However, increasing numbers of retirees are experiencing financial turmoil. Reports from the Employee Benefit Research Institute show that the average amount of debt for seniors has risen from just over $32,000 to over $36,750 from 2010 to 2016. This is almost a 15 percent increase in just six years. Many older consumers are now considering filing for Chapter 7 or Chapter 13 bankruptcy for relief.

A factor in the increase in debt for senior adults is the rise in the cost of health care. In addition, the cost of living continues to rise; however, incomes are not increasing at the same rate. Some individuals may want to retire, yet cannot do so because they have significant debt and no savings. Social Security benefits are often not enough to cover routine expenses, health care costs and debt payments.

Credit card deliquencies rising, creating need for debt relief

Many Connecticut residents and others around the nation are overwhelmed with credit card debt. Recent reports show that the level of debt in the country is over $1 trillion. While most consumers are able to make their payments on time, nearly one quarter of the nation's total debt is delinquent. As some individuals seek debt relief because of these delinquencies, experts offer some insight on how this situation has evolved.

A delinquency is defined as a payment that is more than 30 days past due. Over 20 percent of consumers have reported that they have made late payments on a credit card at least one time. A personal finance website recently surveyed consumers about the reasons why others missed payments to their credit card companies as well as their personal reasons. Demographic questions were also asked to evaluate behavior among the various age groups.