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Two-thirds of all U.S. bankruptcies related to medical bills

Mississippi residents who have had health emergencies likely can appreciate that medical bills are a factor in approximately two-thirds of all bankruptcy filings across the country. A study that contained this information was published in the American Journal of Public Health on Feb. 6.

For the study, a research team surveyed 910 random U.S. citizens who filed for personal bankruptcy between 2013 and 2016. They found that medical expenses ruin the finances of around 530,000 American families every year. They also found that around 66.5 percent of all bankruptcy filings were at least partially attributed to unpaid medical bills. The study is the first to explore the association between bankruptcy and medical bills since Congress passed the Affordable Care Act nearly nine years ago.

Bankruptcy offers protection from foreclosure

People in Mississippi who have fallen behind on their mortgage payments face the possibility of foreclosure. While some lenders are open to loan modifications or short sales to satisfy the debt, many are not. Many lenders will begin foreclosure proceedings, which can end with the lender taking possession of the house and selling it at auction. The proceeds of the auction are then used to pay down the mortgage as well as the legal costs associated with foreclosure.

Where the lender is not willing to work with the borrower and forecloses on the property, filing for bankruptcy can protect the borrower. Once a person files for Chapter 13 or Chapter 7 bankruptcy, the court issues an Order for Relief that includes an automatic stay of collections actions. Creditors are then not allowed to attempt debt collection efforts until bankruptcy proceedings are complete. There are exceptions to the automatic stay in cases where the lender has already filed the foreclosure notice and lenders can file motions to lift the automatic stay.

Second bankruptcy possible but waiting periods apply

Bankruptcy law recognizes that debts might overwhelm Mississippi consumers. When individuals file for bankruptcy protection, they generally do so under either Chapter 7 or Chapter 13. The form of bankruptcy determines whether eligible debts will be discharged or if the person must continue to pay creditors under a court-mandated payment plan. The chapter under which people file also establishes waiting periods before they can file for bankruptcy again.

Under a Chapter 7 bankruptcy, the court relieves a person of financial burdens by discharging many unsecured debts. After people complete this process, the law requires that they wait eight years before seeking Chapter 7 protection again. If they want to file for Chapter 13 protection, however, they only need to wait four years after completing a Chapter 7 case.

Signs you have too much debt

Going into debt is a normal part of life for most Americans. Significant purchases such as a house or car usually require loans. Emergencies happen, medical or otherwise, and you may have to max out your credit cards. The causes of debt are numerous.

As the numbers rise, you may wonder if you should start to worry about the debt you are in. When can you tell your debt has become a problem? When should you start considering filing for bankruptcy?

Tips for paying off credit card debt

Mississippi residents have helped Americans as a whole generate a total of over $1 trillion in credit card debt. Those who want to pay off that debt have several options to do so. However, the best option may be to start with the credit card that has the highest interest rate. This is because reducing the principal balance on that card also reduces the amount of interest paid to a lender.

Ultimately, people will be able to pay their debt down faster if more of each payment goes toward the principal instead of interest. Once a credit card balance is paid off, a debtor will then start paying down the balance with the next highest interest rate. While it may take longer to pay down a debt using this method, it will save a person money in the long run.

The 341 meeting is a major step toward a debt-free future

Perhaps you are about to petition for either Chapter 7 or Chapter 13 bankruptcy protection. Within a few weeks of your filing date, you must attend the 341 meeting.

This is sometimes called the meeting of creditors, but there is another aspect to it: The 341 meeting is a major stop on your bankruptcy journey because you will meet your trustee.

How student loans might be discharged in bankruptcy

In most circumstances, it is not possible to discharge student loans through bankruptcy. However, some Mississippi debtors may be able to discharge them if a few factors are in place. These rules apply to both private and federal loans.

The borrower must be able to demonstrate that repaying the loans will lead to "undue hardship". What constitutes undue hardship has never been defined by Congress, but nearly all federal circuit courts use a standard called the Brunner test. The Brunner test requires that there be extenuating circumstances and that extreme hardship will result from paying back the loan that will not allow the person to keep up a minimum living standard. It also requires that the circumstances are unlikely to change for the term of the loan and that the person has made an effort to repay the loan. This does not necessarily mean the person has already made one or more payments. It can mean that the person has attempted to set up a payment plan or taken other steps. The 8th Circuit uses a similar standard while the 1st Circuit does not have a set standard.

Mortgages and bankruptcy

Various problems, like job loss, a medical crisis or a death in the family, could motivate Mississippi consumers to pursue bankruptcy when their income cannot keep up with debt payments. About two-thirds of the non-business bankruptcies filed by individuals fall under Chapter 7 bankruptcy rules. A Chapter 7 bankruptcy requires the sale of assets to recover money for creditors before a judge typically discharges remaining debts. Certain assets are usually exempt from liquidation, like the family home, but the mortgage on the family home might still remain a burden if not included in a bankruptcy.

About one-quarter of Chapter 7 bankruptcies involve real estate mortgages that have not been paid for 120 days. Often these properties qualify for the homestead exemption, and borrowers choose to apply the exemption. They hope to save the home after bringing their other debts under control, but this choice removes the home mortgage from the bankruptcy process and sometimes leaves them exposed to foreclosure if they still cannot make payments.

Baby boomer bankruptcy is on the rise

Overall, the nation's economy is in relatively good shape. This means that unemployment rates are down throughout much of Mississippi and the rest of the United States. However, there is a somewhat new phenomenon that is showing a darker financial picture for some Americans -- there is a notable increase in bankruptcy filings for older individuals, particularly for baby boomers.

Anything that impacts the baby boomer generation, which represents approximately one-quarter of the population, is certain to have rippling effects throughout the entire economy. Economic researchers report that in the last 25 years, the rate of baby boomer bankruptcy filings has increased sixfold. The overall trend shows bankruptcy rates declining for those 54 and under yet dramatically increasing for the 55-plus group.

Credit card debt is rising in the U.S.

Many people living in Mississippi have concerns about credit card debt. While credit cards can be a useful tool in managing personal finances, consumers will sometimes run up balances that can be difficult to manage or pay off. In fact, a recent study has shown that the average household credit card debt in the United States is $8,284.

In many cases, consumers do not intend to run up significant debts. They use credit cards responsibly, and either pay their balances each month or make reasonable monthly payments. However, circumstances can affect an individual's ability to pay their credit card bills. For example, someone may become ill, unemployed or face a major, unexpected expense such as a medical bill or home repair.

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