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What are some alternatives to declaring bankruptcy?
When you feel the pinch of unmanageable debt, worry takes over. You might conclude your only choice is to go bankrupt.
In reality, there are options besides filing for Chapter 7 or Chapter 13. Here are a few you can try instead of declaring bankruptcy.
Negotiating with creditors
Working directly with lenders is always an option. These entities have an inherent interest in seeing you thrive. Thus, there is a good possibility they are willing to alter the structure of your payments. Be frank and pleasant with their representatives about your situation. Tell the person on the other end of the line how much you owe and what you can afford. The response could be a way out.
Working with a credit counselor
Another path worth exploring is guidance from someone knowledgeable about delicate financial situations. A fiscal advisor can communicate with creditors on your behalf. Together, they may be able to craft a workable repayment plan. Choose a professional who is a member of a reputable credit counseling organization.
If you cannot afford care, does a hospital have to treat you?
Most emergency rooms have physicians that know how to triage patients. For that reason, it often makes sense to visit one for any life-threatening condition. You even may choose to go to the ER for ailments that are less serious.
According to the Centers for Disease Control and Prevention, roughly 130 million Americans go to ERs every single year. Many of these, of course, have neither health insurance nor enough savings to pay for emergency medical treatment.
A duty to provide emergency care
Federal law requires all emergency rooms that receive federal funding to provide medical treatment during an emergency. Therefore, regardless of whether you can pay, you can expect to receive care for any of the following:
- An injury or illness that is severe or life-threatening
- An injury or illness that seriously impairs bodily functions or major organs
- Childbirth that is imminent
What does inflation mean for your credit score?
If your dollar does not seem to go as far as it did just a few months ago, your mind is not playing tricks on you. In fact, according to reporting from CBS News, the prices of goods and services have climbed faster in the past year than during any period in the previous four decades.
By itself, inflation should have no effect on your personal credit score. That is probably not true for the effects of inflation, however. Specifically, if you must pay more for the items and services you need to live, you may have little choice but to reach for your credit cards.
Your credit utilization ratio
Your credit utilization ratio is a major component of your overall credit score. This ratio compares the credit you are currently using to the credit you have available. For example, if you have a credit card with a $1,000 limit and have an outstanding balance of $500, your credit utilization ratio is 50%.
How may a bankruptcy affect my future medical care?
Unpaid medical debts may result in overwhelming financial hardships. Many Americans file for bankruptcy to find relief from unmanageable medical bills or to avoid losing their homes. As noted by Credit Karma, some bankruptcy petitioners may wish to continue paying their medical bills because it helps them maintain their relationships with health care providers.
When you file a bankruptcy petition, you must list all your outstanding debts. Based on whether you file for a Chapter 7 or Chapter 13 bankruptcy, your doctors may not receive payments for outstanding balances. In some cases, health care providers may stop seeing patients with unpaid or discharged debts.
Chapter 7 may discharge medical bills
Maryland residents must pass a means test to qualify for Chapter 7 bankruptcy. If your household income is below the average annual income for a Maryland family of the same size, you could file for Chapter 7.
Divorce and bankruptcy: which should come first?
Going through divorce and bankruptcy separately is stressful even in the most amicable situations.
Dealing with both at once exacerbates the strain on you personally and financially. Here is some information to help you decide which proceeding should take precedence.
When should you file for bankruptcy before divorce?
One major benefit to filing for bankruptcy before filing for divorce is the possibility of canceling joint debts. When filing as a married couple, you should first understand how changes in your circumstances impact your ability to pay creditors.
A marital home in Maryland holds title as tenancy by the entirety which protects the equity in the home from most creditors in a bankruptcy proceeding. However, if a court grants a divorce decree, the title of the property becomes tenants in common, severing the protection of home equity. Another benefit to filing for bankruptcy before divorce is that remaining married can streamline the divorce process, decreasing legal fees and time commitment for each spouse.
How may a federal tax lien affect my property in bankruptcy?
When the IRS places a tax lien against your property, a bankruptcy may not remove or discharge it. As reported by Credit.com, tax debts have a 10-year statute of limitations from the date of assessment. The IRS may collect the amount that you owe until the SOL expires or you sell your home.
Bankruptcy, however, may offer a "pause" on the 10-year timeframe. After submitting your petition, the court issues an automatic stay. Creditors may no longer pursue you for debt. The IRS may also stop collecting a debt from you until after your bankruptcy case closes.
When may I need to sell my home during bankruptcy?
In some cases, a Chapter 7 bankruptcy may require petitioners to sell their homes. If your property's equity does not exceed $25,150, you may keep it under Maryland's homestead exemption statute.
To find your home's equity value, subtract the amount you owe for its mortgage from its current market value. If your home's equity exceeds the state's $25,150 allowance, the bankruptcy court may require you to sell it. Proceeds of a sale first go toward paying off your outstanding tax debts.
What are secured credit cards?
As part of filing bankruptcy, you must repair your financial health. Have you heard about secured credit cards and how they may help rebuild your credit?
NerdWallet explains how secured credit cards work. Learn about all your options for forming a new relationship with money.
The basics
Before receiving a secured credit card, you must make a deposit to reduce the credit card issuer's risk. If you fall behind on paying your bill, the card issuer may take your deposit.
With a secured credit card, your deposit determines your credit limit. For example, if you deposit $1,000, you have a $1,000 credit limit. Over time and with enough responsible use, you build your credit profile. Depending on the credit card company, you could upgrade to an unsecured credit card.
The similarities between an unsecured credit card
Secured credit cards share many of the same features as traditional unsecured cards. For instance, you may use a secured card wherever you would use an unsecured card, and you pay interest on purchases made with a secured card.
How may a Chapter 7 bankruptcy help me keep my home in Maryland?
Between 2020 and 2022, you may have qualified to place your mortgage in forbearance. After a pause in loan obligations, however, you may still find yourself unable to meet your expenses when your mortgage payments resume.
The Ascent reports that only half of the about 8 million borrowers in forbearance have caught up on their mortgage payments. About 264,000 homeowners have fallen behind on their loans even with up to 18-months of forbearance. Reportedly, 38,000 lenders started the foreclosure process to retake properties.
Borrowers may have options as mortgage payments resume
If you lost your job or experienced an income reduction, you may have options that allow you to remain in your home. As noted by Bankrate.com, some mortgage service providers offer a loan modification or forbearance extension.
By changing your payment's due date, you may have the ability to catch up on past-due payments. Your loan servicer could also offer to extend the length of the forbearance. At the end of the extension, however, your servicer may add a charge to your loan payments. If you still find it difficult to meet your monthly obligations, you could consider filing for bankruptcy.
Working with the IRS after bankruptcy
You may file for bankruptcy because you cannot pay your federal taxes. There are several things that you should understand when you choose this route.
When you file for bankruptcy, you usually compile a list of your creditors. The Internal Revenue Service says that you should indicate that the IRS is one of your creditors. This allows a representative from a bankruptcy court to get in touch with this department. If you want to ensure that the IRS understands your situation, you can always reach out. A representative can look up your bankruptcy case number and verify that the department has your details.
What happens to taxes during bankruptcy?
You typically have to file your taxes each year while the bankruptcy is ongoing. Sometimes, you may require an extension. You have to request and receive an extension before you file taxes after the deadline.
Additionally, you still may owe taxes each year. Although you filed for bankruptcy, you have to pay your current taxes. If you do not, a bankruptcy court may dismiss the case. You could also risk dismissal if you do not file your tax returns.
Tips to help secure a car loan after bankruptcy
Going through bankruptcy may make it harder for lenders to give you a loan, but it is far from impossible. Lenders are indeed on the lookout for red flags that signal somebody is a financial risk. Still, if you want to buy a new car after your bankruptcy, you may find a lender willing to take a chance on you.
If you plan on getting a new car following your bankruptcy, think about how you might secure a car loan. Credit Karma describes some steps that may help you find the right lender as well as avoid a loan with unfavorable terms.
Take time to rebuild your credit
If time is not of the essence, you could spend time rebuilding your credit so that you may find a loan with a low-interest rate. Consider requesting a copy of your credit report so you can check your credit score following your bankruptcy. From there, you could explore options that may help you raise your credit score, like getting a secured credit card or becoming an authorized user on a relative's credit card.
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