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Eugene Bankruptcy Law Blog

Medical bills cause bankruptcy rise among older adults

People in Oregon who are 55 and older may be more likely to file for bankruptcy than they would have been 30 years ago. Between 1991 and 2016, the percentage of people in the 55 to 64 age group who declared bankruptcy went up 66%. For those 65 to 74, it has increased more than 200%. In 1992, only around 2% of people who filed for bankruptcy were 65 and older. That has risen to 12%.

One of the main reasons for this surge in bankruptcies is medical costs, with 60% of the bankruptcies filed by people 65 and older the result of unpaid medical bills. Some of them have run out of savings completely, and since many are no longer working full time or at all, they are unable to catch up.

How the automatic stay works during the bankruptcy process

If you made the choice to file for bankruptcy, it is probably because you feel you are in a place where you can no longer manage your financial obligations on your own. Another reason may be the constant contact from creditors and debt collectors, which can cause you additional stress as you try and find a way out. You may believe that filing for either Chapter 7 or Chapter 13 could provide you with the opportunity to secure a better future. 

One of the benefits of filing for consumer bankruptcy is that it will enact the automatic stay. This halts contact from debt collectors and stops collection efforts against you. The automatic stay is one of the many reasons why bankruptcy could be the right way forward for you and your family. If you are not sure how you could ever deal with your debt on your own, you may want to learn more about how you can deal with some types of debt once and for all.

Credit card debt in the U.S. increases

The amount of money U.S. consumers owe to credit card companies reached almost $900 billion at the end of 2018 according to a recent report from the Consumer Financial Protection Bureau, which means that the total revolving debt in the United States is now more than $100 billion higher than it was before the recession. Most of this new debt is currently being racked up by borrowers with either prime or super-prime credit ratings, but credit card spending is increasing the fastest among consumers in Oregon and across the company with lower credit scores according to the CFPB.

Most experts believe that soaring credit card spending is being fueled by a booming economy and surging levels of consumer confidence. The United States is in the midst of its longest economic expansion ever, and unemployment has fallen to its lowest level in half a century. Rising salaries and low interest rates are also factors. Wages are expected to increase by 3.3% in 2020, and the cost of borrowing remains far below pre-recession levels.

Understanding circumstances where bankruptcy may be a good option

Oregon residents who are in debt may wonder when is the right time for them to file for bankruptcy. They might have $20,000 or $30,000 in credit card debt or a car loan for a few thousand dollars.

First, the individual may want to consider their income and asset level. Having $30,000 in debt to pay off is a lot for someone who only makes $30,000 a year. However, an individual who makes more than $100,000 a year may find that paying off this debt is doable depending on other expenses they have. Bankruptcy could be considered by some to be a drastic step, but it may be what a person needs in order to restore their financials.

Bankruptcy potentially an option for student loan borrowers

Any number of personal setbacks could cause student loan borrowers in Oregon to fall behind on their payments. Although people largely believe that student loans cannot be discharged by a bankruptcy action, cases of undue hardship might convince a judge to provide a debtor with relief from student loans.

Courts possess a fair amount of latitude about whether to accept a claim of undue hardship. Generally, a student loan debtor might seek the discharge of his or her loans if his or her income does not support a basic standard of living. A debtor also must show that the financial hardship will persist for the foreseeable future. He or she must also present the court with evidence that a good faith effort has been made to repay the loan.

Credit card debt is growing nationally

Many people in Oregon and across the country are struggling with the growing weight of credit card debt. Nationwide, Americans owe more than $1 trillion on their credit cards. During the second quarter of 2019, American consumers accumulated an additional $35.6 million in debt. Over the year, some estimates expect that they will owe another $70 billion. Oregon ranks 29th in the country as far as credit card debt escalation, but many people in the state are finding it difficult to make ends meet. Many people who owe a significant amount on their credit cards are also struggling with other bills.

When people owe more on their credit cards, they often take longer to pay off their balances. As a result, they pay much more in interest. This is especially common when people need to turn to credit card debt in order to cover basic costs or make ends meet during the month. Over 33% of all cardholders have carried their debts for two years or more, and many people have more credit card debt than they do in savings. People often accumulate credit card debt when paying for car repairs, home improvements or medical bills.

Chapter 13 bankruptcy may be right for those with steady income

No one plans to end up in a significantly difficult financial situation. However, a number of unexpected circumstances could contribute to anyone facing money problems. Even if you have a steady income, you may have substantially more debt than you can handle and wonder what your options are.

For individuals like you who have a regular income, Chapter 13 bankruptcy may be the debt relief option to consider. Though you may hesitate at the idea of having to file for bankruptcy, it may be the step you need to take in order to secure a more stable financial future.

Study finds link between health insurance gaps, bankruptcy

People in Oregon and across the U.S. are significantly more likely to file for bankruptcy protection if they experience an interruption in their health insurance coverage, according to a new study published in August by the American Bankruptcy Institute. Researchers used Bureau of Labor Statistics data to analyze the employment, health coverage and bankruptcy information of over 12,500 Americans. Of those individuals, 454 declared bankruptcy between the years of 2008 and 2014.

The researchers found that there was a "strong association" between health coverage gaps and consumer bankruptcy filings. Specifically, they found that people who had coverage interruptions of two years or more were more than twice as likely to declare bankruptcy. Furthermore, the association between coverage interruptions and bankruptcy remained even after researchers controlled for income and debt variables.

The basics of bankruptcy

Oregon residents who find themselves overwhelmed with debt can seek relief by filing for Chapter 7 or a Chapter 13 bankruptcy. A Chapter 7 bankruptcy wipes out most debts and offers the chance of a fresh start. Those who file for Chapter 13 bankruptcy pay down some or all of their debts over a period of three to five years. Individuals generally file for Chapter 13 because they have assets they would like to protect or they earn too much money to file a Chapter 7 petition.

Those who wish to obtain debt relief by filing a Chapter 7 bankruptcy must first pass a means test. To pass this test, they have to earn less than their state's median income for a family of the same size or not have enough money to make ends meet after paying allowable expenses. While assets can be liquidated in a Chapter 7 bankruptcy to pay creditors at least some of what they are owed, this rarely happens unless the assets have significant value. There are also federal and state Chapter 7 exemptions that protect assets such as homes, automobiles, personal possessions and tools used to earn a living.

Personal circumstances may dictate type of bankruptcy filing

It can be difficult to get finances back on track when debts are piling up. Oregon consumers have options to reduce or eliminate debts, including negotiating with creditors or filing for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. The type of bankruptcy they should file for depends on their particular financial situation and their goals for the process. In many cases, the rules will determine which type of filing to make.

Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, discharges most unsecured debts. The first step in a Chapter 7 case is passing the means test. The means test is a comparison of the person's income with the median annual income in the state. If the person's income is less than the state median income, the means test is passed and he or she may file under Chapter 7. If the person's income exceeds the state median income, it may still be possible for him or her to file Chapter 7 bankruptcy but not in all cases.

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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 19 years.

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