We have seen many giant retailers succumb to the pressures of an ever-changing retail landscape. The traditional retail business model is all but obsolete. The latest hobbling giant is Pier 1 Imports. While they have not filed for bankruptcy, they have tapped into some resources which are indicative of debt restructuring.
Married couples often share the same debts, but that is not always the case. There are bankruptcy filing options for both situations. One partner may need to wipe out their debts but want to avoid harming the other partner’s credit. In some states, it can be beneficial to file for bankruptcy jointly. Before deciding, you should know the pros and cons of each filing option for married couples.
One Spouse Filing for Bankruptcy
If a couple is in a situation where only one of the two partners needs to file for bankruptcy, filing individually may be the right choice. An individual can file for chapter 7 or chapter 13 bankruptcy.
Foreclosure is the last thing you want when you are already having trouble in life. There is a multitude of reasons you may find yourself in financial trouble bad enough to warrant bankruptcy, a short sale, or foreclosure. The situation may seem hopeless, but there may be an option you are unaware of. In some cases, you may be able to sign over the deed to your house to the lender and release yourself from the burden of the debt.
A Deed in Lieu
Rather than losing your house through short sale or foreclosure, you may be able to convince the bank to take your deed. Some banks are not willing to let you short sell. In this case, while you may not feel compelled to help the bank, you could free yourself of the debt by giving them the deed. While this may be a good option for many, it is far from a sure thing.
A homeowner can sell their home for less than they owe if the circumstances are right. This is called a “short” sale. Short sales are often beneficial for the seller, the buyer, and the creditor. A person can market the sale as a short sale to attract buyers. This may sound like an easy out for someone who cannot make payments, but there are negative consequences to be considered when considering a short sale as a debt relief option.
So, What Is a Short Sale?
A “short” sale of a home is when the seller sells their house for less than they owe the mortgage lender. If someone is behind on payments, they may consider this as an option to avoid foreclosure or bankruptcy. In order to be able to utilize the short sale option, the seller (debtor) must apply for permission from the bank (creditor). Why would a bank agree to this? In many situations, they can recuperate more of the owed money than they might be able to if the debtor files for bankruptcy or the home is foreclosed on.
There may be new evidence that a strong job market does not necessarily lead to financial freedom for individuals. Over 7 million Americans are at least 90 days behind on their car payment. A car is a necessity for most people and the idea of losing it to repossession is enough to keep them awake at night. What can these individuals do to get back on track?
Who Is Struggling with Car Payments?
According to a recent article in the Washington Post, the majority of the people that are 3 months behind on their payments are under the age of 30. They have low credit scores and they are finding it difficult to pay their monthly student loan bills. A large portion of these borrowers are “subprime” meaning their credit score is under 620. Most of the borrowers that are more than 90 days late on their payments received their loans from a “car finance” company as opposed to a traditional credit union or bank. Less than 1% of borrowers from credit unions are 90 days late on payments.
Medical bills are the number one reason for bankruptcy in the United States. Multiple studies have shown the in 25% – 50% of bankruptcies, medical debt was significant. However, the answer to the question ‘is medical bankruptcy a real thing?’ is ‘no’. While medical bills are a heavy contributor to personal bankruptcy, it is not its own form of bankruptcy. It is, however, an interesting topic that has reached as far as Washington D.C. and ‘medical bankruptcy’ is a term that is resurfacing as Elizabeth Warren begins her bid for Presidential election in 2020.
What is ‘Medical Bankruptcy’?
This is a concept that was first made famous by a couple of papers written by a group which included Elizabeth Warren in 2005 and in 2009. The papers claim that at least 50% of all bankruptcies were caused by medical debt. A ‘medical bankruptcy’ is one that is linked to substantial medical debt. Many experts have since refuted the accuracy of the claim. However, what cannot be refuted is that medical debt is a major contributor to many bankruptcies.
Can You File for Personal Medical Bankruptcy?
In short, no. There is no legal version of bankruptcy called ‘medical bankruptcy’. In terms of personal bankruptcy, you are mostly limited to chapter 7 and chapter 13 depending on your income limitations. That does not change the fact that debt related to medical expenses is a serious consideration when filing for any type of debt relief. Medical debt is considered ‘unsecured’. This means, just like credit card debt, it can be reduced or even eliminated during the bankruptcy process.
When Should You File for Bankruptcy Due to Medical Debt?
Well, there are many factors that go into the decision:
- Are you behind on medical bill payments?
- Are you missing payments altogether?
- Are you receiving snail mail and phone calls from collectors day and night?
- Are you behind on other bills such as mortgage, credit card, and car loans?
If the answer is ‘yes’ to even half of those questions, it might be time to talk to a professional. In many cases, medical debt is valuable and debt collectors do not give up easily. Harassment from debt collectors does not have to be a way of life for you. Elias Dsouza is a skilled and licensed attorney that is equipped to guide you through any debt settlement process. He can help you determine if bankruptcy or debt settlement is the right answer for you. Contact Elias today for a free consultation.
So, you made the decision to reclaim your life from financial trouble in 2018 and file for bankruptcy. When you file, you basically separate from your estate. You can think of your estate as a separate person. This can create some complexities during tax season. To add more into the mix, the chapter under which you file can change things! Read on to learn more about the fun of taxes after bankruptcy!
Taxes After Chapter 7
If you utilize bankruptcy under chapter 7, you will face certain limitations with regard to tax debt. For example, you can only discharge income tax. You cannot discharge tax debt that is more than three years old. Also, the tax return associated with the debt cannot have been filed more than two years before the bankruptcy. In addition to the afore mentioned stipulations:
- The tax return must not have been filed by the IRS. This is what is called a “substitute return” and debt created by this return cannot be forgiven during bankruptcy;
- Only taxes that were assessed within 240 days of bankruptcy can be forgiven;
- The debtor cannot have a previous conviction of tax evasion or fraud.
Taxes After Chapter 11
A bankruptcy court will take a look at your current tax situation as well as the situation you will be in for the foreseeable future. If the court does not believe you can handle your tax situation, they will reject your bankruptcy filing under chapter 11 and force you to convert to chapter 7. In addition to this tax consideration, those who file under chapter 11 must be able to shoulder the burden of capital gains resulting from property sold.
Taxes After Chapter 13
Remember, people who file under chapter 13 must forward all disposable income into an account meant to pay off debt and controlled by a trustee. If your tax return was not figured into the calculations done when filing for bankruptcy, the refund is considered disposable and must be forwarded to the trustee. If your expenses have changed, you can petition the court to give you all or part of you refund to put toward the new expenses. This process is called “excusing a refund”. To do this, you must:
- Tell the court how much you need;
- Inform the court of which refund you are petitioning to excuse;
- Specify why you need the refund excused (wholly or partially).
Taxes are confusing without the addition of bankruptcy, but sometimes a complex problem requires a complex solution. If you are considering bankruptcy, contact Elias Dsouza. He has the knowledge and experience to guide you through bankruptcy.
There are many reasons a business looks at bankruptcy as an option. Competition, economic climate, lawsuits, and many more situations can create an unsustainable environment. Believe it or not, some businesses cannot afford to declare bankruptcy so they just close. The new bankruptcy bill was inevitable. Support for small businesses similar to that of chapters 12 and 13 is long overdue. It shortens the amount of time it takes to file, allows small businesses to file at a cheaper rate, and allows the business to maintain more control during the process.
Back in the Day
Life before the Small Business Reorganization Act of 2018 was pretty grim for a failing business. A business that was considering bankruptcy almost certainly had to follow the rules of chapter 11. They had to file within 120 days of declaration, were forced to notify and plan with creditors, and the process was very expensive. So expensive, in fact, that many businesses chose to close instead of potentially saving their business through bankruptcy.
The New Bill
The Small Business Reorganization Act of 2018 gives struggling businesses with less than $2.5 million in debt, the opportunity to file for bankruptcy in a way that mimics chapter 13. For example, under the new bill, a small business will not be expected to pay over $25,000 to a creditor in the first 90 days of bankruptcy. Bankruptcy under the new sub-chapters will greatly reduce the cost of the process which can be around $300,000.
What Is Required to Declare Bankruptcy Under the New Sub-Chapter V?
Of course, there are still requirements for a small business if they wish to take advantage of this new opportunity. Under sub-chapter V, a small business must:
- Give a brief history of the business which is declaring bankruptcy;
- Provide data to support the execution of the repayment plan proposed by the debtor;
- Offer a detailed description of the business’s ability to liquidate;
- Put a system in place to allow for the funneling of all future earnings to the designated trustee to support payment to creditors.
Bankruptcy is often thought of as a negative outcome for a business, but this does not have to be the case. New laws are making it more possible for a business to declare bankruptcy and stay open. If your small business is struggling and you need help understanding your options, contact Dsouza and Strachan Lawgroup Group for a free consultation. Elias has been helping businesses with their financial troubles for over 15 years.
Every year, over 1.5 million bankruptcies are filed. About 97% of them are filed by individuals. Bankruptcy is an extremely important tool and can be life-changing if used correctly. People who file for bankruptcy are normal, everyday citizens usually over age 45. They are married with families and plans for their lives. Sometimes things happen that are beyond our control. Amongst these things are medical problems.
Bankruptcies Related to Medical Expenses
This may or may not surprise you, but medical expenses are the number one cause of bankruptcy in the United States. Here are some quick facts:
- 4 out of 5 people that declare bankruptcy because of medical bills have health insurance.
- 1 in 10 adult Americans delay medical care because they cannot afford it.
- Just under 10% of adults struggling to pay their medical bills have declared bankruptcy.
- Roughly half of all collections accounts on American’s credit reports are medical bills.
Clearly, medical bills are a problem for millions of Americans every year. What can you do to avoid overwhelming medical expenses?
Tips to Avoid a Pile Up of Medical Bills
Healthcare expenses are tough to deal with and there is no getting around that. However, there are ways to protect yourself from an insurmountable situation.
- Talk to the billing department of the provider. They may be able to offer insight on private insurance, public coverage, and charities available to you.
- Take a very close look at your bills. Billing and coding errors happen all the time. Disputing a bill is a perfectly valid practice. Healthcare is a product just like anything else.
- Consider using a credit card to pay your medical bills. While you should still be sure to pay at least the minimum balance every month, you may be able to buy yourself some time.
What Can You Do If You Have Unmanageable Medical Bills?
Opening that envelope when you know a nasty medical bill inside is never fun, but before you pay it there are some things you can try.
- Talk to the billing department and negotiate your bill. The first bill they send is often an offer. If you have extenuating circumstances, you can use that to your advantage.
- Ask the hospital or other provider if they can offer a 0% interest payment plan. Many times, you do not even have to qualify. This option is preferable to a hospital because it saves them from having to sell the bad debt to a collection company for a fraction of the cost.
If you are buried in medical bills and have exhausted your options, you need help. Bankruptcy can be a wonderful tool for people in this situation. Medical bills are an unsecured debt and can be drastically reduced or eliminated altogether in bankruptcy. Contact Elias Dsouza for a free bankruptcy consultation.
Bankruptcy can be a great tool for someone who is trapped in debt. If done correctly, it can offer a fresh start. However, before filing for chapter 7 or chapter 13 bankruptcy, there are things that must be considered.