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Bankruptcy and the marijuana business: a legal limbo
As of July 2023, Maryland joined the growing number of states permitting the licensed sale of recreational marijuana. With the cannabis industry essentially starting at zero in the state, this has created a promising new business opportunity for entrepreneurs, including people of color, in Greenbelt and the rest of Prince George's County.
A $26 billion industry
In fact, as more and more states decriminalize cannabis, thousands of dispensaries and other marijuana businesses have popped up across the country. In 2021 alone, legal marijuana sales generated $26 billion in revenue. Just like any other business, cannabis businesses are at risk of failure due to economic downturns, bad luck or other reasons. When most business owners are struggling to pay their debts, they can file for bankruptcy protection as an individual to stop creditor harassment and give them the chance at a reasonable solution. But bankruptcy is not an option for most people in the marijuana industry.
What is the No. 1 reason people file for bankruptcy?
Accumulated and unpaid healthcare expenses create an overwhelming burden on households across the nation each year. As reported by finmasters.com, medical debts incurred by uninsured individuals account for 46% of bankruptcies and represent their No. 1 cause.
Many personal bankruptcies also result from a combination of two or more factors. Treating a medical issue, for example, while also taking the necessary time off without pay to recover often creates a critical state of affairs. Other unexpected expenses or a surge of credit card bills could add to an already perfect storm and hinder a household's ability to get back on track.
How many medical debts could a bankruptcy discharge?
The United States Bankruptcy Code does not specify a limit on how much medical debt the court may discharge. As noted by creditkarma.com, under certain circumstances, bankruptcy petitioners may have all their unpaid healthcare debts discharged through a Chapter 7 filing.
Options for financial relief for medical debt from diabetes
For decades, many people have been successfully managing diabetes. As a result, others may forget about the seriousness of the illness and what treatment requires for sufferers.
Recent experiences highlight a new growing concern among diabetes patients. Individuals may not only find themselves with physical struggles but with financial ones as well.
An overlooked consequence of the illness
Diabetes affects people all around the world. However, the "Diabetes Belt" in Southern parts of this country has provided medical professionals with a concentrated demographic to study people dealing with the condition.
One "side effect" of the disease that many do not think about is the medical debts a person can amass from treatments. A study by National Public Radio discovered that over 20% have medical debt in collections in the Diabetes Belt. In one county, the number neared 40%, which far outpaces the national average of 13%.
Bankruptcy may offer relief from overwhelming student loan debt
Since 2020, at least 40 million federal student loan borrowers had their monthly payments paused. As reported by the Associated Press, with payments now set to resume, the U.S. Department of Education anticipates a historic number of borrowers not having the means to meet their due dates.
Higher living expenses combined with the inflation increase could result in many borrowers defaulting. Students who graduated during the pandemic may have found jobs with starting salaries that covered their expenses. Their current budgets, however, may not have the ability to "stretch" enough to include loan payments.
A student loan default may lead to aggressive collection efforts
According to data from the U.S. Federal Reserve, borrowers carry a total of about $2 trillion worth of outstanding student loans. Missed payments on student loans may also add up and possibly lead to default.
Rebuilding your credit after filing for bankruptcy
Filing for bankruptcy can have a significant impact on your creditworthiness and financial standing. However, it is important to remember that bankruptcy is not the end of your financial journey. With dedication and responsible financial habits, it is possible to rebuild your credit after filing for bankruptcy.
Here are some strategies that can help you rebuild your credit and work toward a healthier financial future.
Create a budget and stick to it
Assess your income and expenses and create a realistic budget that allows you to meet your financial obligations while leaving room for savings. By tracking your spending and avoiding unnecessary debt, you can demonstrate responsible financial behavior and regain control over your finances.
Establish an emergency fund
Building an emergency fund is necessary to avoid falling into debt again. Set aside a portion of your income each month and gradually build up your savings. Having an emergency fund will provide you with a safety net in case of unexpected expenses and reduce the need to rely on credit.
Evaluating if Chapter 13 bankruptcy is the right choice
Financial crises can be overwhelming and challenging. In such situations, individuals may consider different debt relief options. One of these is filing for Chapter 13 bankruptcy, a legal process that allows individuals to restructure their debts and pay them off over time.
Understanding Chapter 13 bankruptcy and assessing its suitability for a given situation is vital. This form of bankruptcy provides certain advantages, but it also has its limitations and obligations. Recognizing these factors can guide an individual in making an informed decision.
Understanding Chapter 13 bankruptcy
Chapter 13 bankruptcy allows debtors who are filing for bankruptcy the chance to repay some, if not all, of their debts. Under a repayment plan that must be approved by the court, a debtor will make affordable payments to their creditors. Repayment plans under Chapter 13 Bankruptcy are typically set up to last between three to five years.
When is the best time to file for bankruptcy during foreclosure?
Once your home goes into foreclosure, you need to work diligently to save it. Otherwise, the lender will sell it to someone else. After all, the lender's main goal is to get money for the property. They are not in the business of collecting homes.
The foreclosure process is rather lengthy. You have multiple chances to stop it and fix your loan situation. Still, if you cannot do that, you may wonder when the right time is to file for bankruptcy and save your home.
File when your home goes up for sale
Much of the foreclosure process will focus on your lender trying to work with you to solve the problem. You will have the chance to discuss your options with the lender, usually through mediation. However, if you financially cannot save your home by bringing your mortgage up to date or reaching an agreement with your lender, your lender has the right to put your home up for sale. It is at that time you should file for bankruptcy.
Could your creditors take all your assets after your death?
Debts do not go away upon your death. You still have an obligation to pay them. However, some creditors may walk away empty-handed, and it could impact how much your heirs get from your estate if you have a lot of debt.
Maryland law has multiple rules regarding the distribution of assets and payment of debts after your death.
Creditor claims must be timely
Creditors only have six months from the date of your death or two months from the date when your personal representative sends them or publishes a notice to make a claim against your estate for any unpaid debt. If they miss the deadline, they lose their right to make any claims, and they have no legal right to collect any money for debts solely owed by you.
Distribution order of your assets
The law sets the order in which the personal representative will disburse your assets. The first payments must go to the register for administration expenses, funeral expenses and personal representative or attorney compensation.
Responsibilities of a chapter 13 trustee
A bankruptcy trustee plays a pivotal role in Chapter 13 bankruptcy cases. Appointed by the United States Trustee, the trustee manages the debtor's repayment plan, ensuring that the process follows federal regulations.
There are several responsibilities that the trustee carries throughout the bankruptcy process.
Reviewing and assessing the repayment plan
Upon filing for Chapter 13 bankruptcy, the debtor submits a proposed repayment plan that outlines their ability to repay their debts within three to five years. The trustee reviews the plan meticulously, verifying the accuracy of the financial information provided and assessing the feasibility of the proposed plan.
Holding the 341 meeting
The trustee organizes and conducts the meeting of creditors, also known as the 341 meeting. During this meeting, the trustee asks questions regarding the debtor's financial situation, assets and proposed repayment plan. Creditors may also attend the meeting to ask questions, voice concerns or object to the repayment plan. The trustee ensures that all parties follow proper procedures and remain respectful during the meeting.
3 common questions about bankruptcy and your credit report
Depending on if you have been making consistent payments on your debts, bankruptcy will likely significantly impact your credit score in the short term. However, if you are at the point where you are seriously contemplating filing for bankruptcy, you probably already have missed payments to your creditors.
If this is the scenario you are in, you probably wonder how bankruptcy will affect your credit going forward. Familiarizing yourself with the following answers may help you formulate a plan for your future finances.
1. Will I be able to get credit after filing for bankruptcy?
Yes, you likely will get plenty of offers in the mail for credit cards, car financing or other personal loans. However, these are typically not great financing offers as the annual fees, interest rates and other credit costs remain very high until you rebuild your credit.
2. How long does bankruptcy stay on a credit report?
A bankruptcy public record will still affect your credit scores as long as it appears on your credit report. A Chapter 13 bankruptcy stays on your credit report for seven years after filing. A Chapter 7 bankruptcy remains on your credit report for ten years from the filing date.