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Knoxville Bankruptcy Law Blog

Chapter 7 Bankruptcy can be a lifesaver after a summons is served

When a lawsuit is started in Tennessee and other states, the papers must be filed in the court house and served on the person who is being sued. A summons is usually included with those papers, and it tells the defendant how and when to respond to the lawsuit. When the summons and complaint have to do with a claim for back credit card debt or unpaid medical bills, Chapter 7 bankruptcy is often called upon to perform its highly effective debt relief remedies.

Most people are understandably overwhelmed by the receipt of dunning calls and collection letters in the mail. That uncomfortable, oppressed feeling is exponentially more disrupting when the intrusion into one's life is marked by service of process of a lawsuit for money owed. And, where the amount of the debt claimed is outside the realm of possibility, effective bankruptcy remedies have been decisive in eliminating the problem quickly and permanently.

Medical debt is a leading cause of financial strain

Medical care is expensive, and many in Tennessee lack the savings and financial resources to deal with an emergency. Just one illness or injury can cause a person to spend his or her life savings to keep up with the bills that quickly accumulate after a hospital stay or visit to the emergency room. Even when people have insurance and steady income, medical debt is a reason why many have to file for bankruptcy protection.

After the Affordable Care Act passed at the end of 2017 it gave many Americans access to insurance who needed it. A survey of 910 people who filed for bankruptcy between 2013 and 2016 revealed that even after the passage of this legislation, over two-thirds filed for bankruptcy due to or partially because of overwhelming medical debt. Researchers estimate this suggests that medical bills play a role in over 500,000 bankruptcies every year.

Why more seniors are going bankrupt

The senior years of life are supposed to be free of financial struggles and come with a comfortable retirement. It is a time to worry less about money and enjoy the fruits of working for so many decades. Unfortunately, this has become less of a reality for the aging American population.

In fact, more and more seniors are turning to bankruptcy. The rate has doubled for those 65 years old and up and tripled among the elderly 75 and over, shares U.S. News and World Report. The average age of someone filing for bankruptcy has also increased from 44.4 to 48.5 years old. What are the reasons for these changes?

Options for individuals drowning in medical debt

A car accident, prolonged illness or other type of medical emergency can quickly wipe out a person's savings and lead to crippling and overwhelming bills. Many Americans carry medical debt, but for some, it can spiral out of control and lead to a financial crisis. There are a few ways by which a Tennessee consumer can handle this type of debt and seek a better financial future.

Consumers have rights, no matter what type or how much debt they have. A person struggling with medical bills will find it beneficial to know his or her rights and how to protect credit scores against unfair practices. Creditors do not have consumer best interests in mind, and each person is entitled to fair treatment. 

Using a debt tracker to develop a strategy for debt relief

Upon encountering substantial financial difficulties, many consumers in Tennessee and elsewhere may be willing to try just about anything to be free of debt. Since there are a variety of tactics to employ when pursuing debt relief, choosing the most viable option can be intimidating at times. In some cases, one who is facing similar concerns might be able to stave off debt by using a debt tracker.

At first glance, one may view a debt tracker as being an elaborate tool that is challenging to set up and even harder to follow. However, using this tool could be as simple as writing the necessary information on a note pad. One can form a debt tracker simply by taking a sheet of paper and writing down the names and types of each account, their balances and interest rates, and the payment dates and amounts of each in turn.

Many people find themselves overwhelmed by medical debt

Medical care is expensive, even for people in Tennessee with health insurance. Even a minor procedure or one visit to the emergency room can result in crippling medical bills and overwhelming debt. It is common for people with some type of coverage to accumulate significant medical debt because of a chronic health condition, emergency health issue or surgery.

After the passing of the Affordable Care Act, many had access to health insurance despite preexisting conditions and other factors. However, not all plans are created equal, and many people are living with balances they may never be able to pay off. For example, loopholes in the terms of the one person's health coverage allowed a hospital to charge $80,000 for an emergency procedure.

Credit card debt can quickly become overwhelming

Most people in Tennessee and around the country want to pay their bills, be responsible citizens and provide for their families. In a healthy economy, this should be an achievable goal. The reality is that even though the economy as a whole is healthy, wages have not kept up, and many people struggle to pay their monthly bills. If an un-anticipated crisis such as a layoff or health issue occurs, barely keeping up can rapidly become failing to keep up. Credit card debt can contribute significantly to the seriousness of the situation.

When a crisis happens that makes it difficult to pay down a credit card balance, that balance can quickly appear to be an insurmountable mountain of debt. With interest charges and late payment charges, the balance may continue to grow even without additional charges being added to the card. Failure to pay on the account could damage one's credit rating, and, if the bill is not paid over several months, a law suit could result.

Chapter 7 bankruptcy: Voluntary or involuntary property transfer

A business entity or an individual borrower who is unable to repay creditors for loans, goods or services will generally file a court petition to declare bankruptcy. In some cases, however, U.S. bankruptcy laws under 11 U.S.C.§303 authorize creditors to force delinquent borrowers through bankruptcy court involuntarily. Perhaps the lender suspects the borrower of hiding assets or refusing to file bankruptcy on his or her own.

Whereas a few entities are not subject to forced bankruptcy, including certain government-related borrowers such as banks, credit unions or nonprofits, most involuntary bankruptcies involve business entities because, under the law, they cannot protect their assets from creditors.

Debt relief: Out goes the holidays, in comes the bills

Over the holidays, many consumers in Tennessee may have taken full advantage of the ease of access involved with using a credit card to fund purchases. Now that it is time for the bill to come due, some may be struggling to deal with the overwhelming financial weight of their previous decisions. While this may lead to a temporary halt in spending for many individuals, for others, it could prompt a need to pursue debt relief.

Recent reports indicate that the average consumer added more than $1,200 to his or her credit card balances over the holidays. Studies suggest that this is a substantial increase when compared to averages from the previous holiday season. In a recent survey, more than 60 percent of consumers were uncertain how they would manage to pay off their debts.

Issues with high levels of credit card debt can be overwhelming

There are many individuals in Tennessee and elsewhere who have experienced the struggle of dealing with overwhelming financial obligations. While one may encounter these issues under a variety of circumstances, studies indicate that credit card debt accounts for nearly 25 percent of the average person's financial woes. Those who struggle under the weight of debt may wish to implement a plan to take back control of their finances, but they might be uncertain where to begin.

When forming a plan to address debts, experts indicate the one of the first steps to take is to make a list of recent financial transactions. Those who take the time to consider how much money they spend at restaurants and movie theaters may become more aware of where cutbacks can be made. Re-evaluating one's financial priorities and implementing a budget could help relieve some level of financial pressure.

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