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Edmonds Bankruptcy Law Blog

Bankruptcy is a strong choice when the debt load is overwhelming

Residents of Washington state, like those in other states, are experiencing a spike in credit card debt. Balances and the gross amount of debt collectively accumulated are now being compared to what existed in 2007, just before the financial collapse and beginning of the recession. These trends may be signs that the country is headed again for trouble with a glut of unpaid debt, which generally also is evidenced by an increase in bankruptcy filings.

For those who can pay their debts down, there are a few basic tips for wise debt paying. Remember that credit card debt with high interest rates is considered "bad debt" and probably the worst kind of debt. The consumer drowns in a sea of rising balances fueled by a huge interest generator. The debtor should therefore look to paying toward these accounts after all minimum monthly payments have been made.

Chapter 13 bankruptcy provides a payment plan to get current

Washington state consumers can get a fresh start and relieve the pressure of overwhelming debt by filing and completing a bankruptcy. Chapter 13 bankruptcy gives a consumer the opportunity to pay off debt over a three to five-year period during which the debtor will pay a predesignated monthly installment to a Chapter 13 trustee. As soon as the Chapter 13 is filed, the automatic stay goes into effect and continues to prohibit collections by creditors throughout the bankruptcy.

A Chapter 13 is generally filed where a home mortgage has fallen behind, and the individual or married couple need an extended time to pay the arrears and get loan payments up to date. It can be filed where certain tax debts are going to be paid through monthly payments. After the end of the 36 to 60-month period of successful payments to the trustee, the debtor will get a discharge of all debts.

Bankruptcy does not spell permanent doom for one's credit report

About 500,000 persons file bankruptcy in the United States annually, and Washington state gets its proportionate share of those filings. The main drawback that most observers attribute to bankruptcy is its dismal effect on one's credit rating and scores. The negative impact on credit scores does occur, but the other side of that coin is that credit repair after bankruptcy is possible and attainable with some focused effort.

The first way that credit may be rebuilt is by continuing to pay on certain secured counts that existed prior to the bankruptcy. Thus, if one retains a car and the car loan in a bankruptcy, there will be a salutary effect on the credit rating after the bankruptcy discharge, as long as the payments are made meticulously on time. The same applies for those persons who retain their house and mortgage in a bankruptcy. After discharge, payments are made until the mortgage is paid off.

Credit card debt after the holidays may prove to be overwhelming

The holiday season in Washington state and everywhere else is a joy for most people due to their relaxing encounters with family and friends and the joyful reigniting of the values of love, charity and gift-giving. The time is short, however, and within a few days a flood of credit card debt will appear in some people's mailboxes, knocking them out of their reverie. It is that post-holiday rush of financial obligations that may make the season slightly depressing overall for some people.

Generally, the rise of credit card debt in the country continues apace. At this point, a flood of defaults and charge-offs has not occurred. That fact, however, influences creditors to increase the generosity of their credit offers. That makes it easier for those less-equipped financially to get themselves overextended.

Chapter 7 Bankruptcy wipes out unsecured debt for a fresh start

Residents of Washington state who are pressured by burdensome debt must often make decisions on how to get debt relief and resolve the problem. When making that decision, some people also become concerned with the impact of the decision on their credit score. Sometimes overwhelming debt tends to rule out worrying about credit ratings, especially because credit scores and ratings are something that can be improved later. This is true even with respect to the bankruptcy remedy.

A consolidation loan may carry a lower interest rate than the borrower's credit cards, making it a slightly quicker way to pay off debt. There may be some improvement in credit score by going this route, in that the credit cards will be paid. However, a new loan on top of all that prior debt, even though paid, can lower one's credit score. If the borrower gets behind on the consolidation loan, then the same problem with lingering debt and festering credit scores will remain.

Bankruptcy may erase high medical bills and credit card debt

In Washington state, is there relief for a senior couple who are near 80 years old, the wife suffers from a heart condition requiring recent surgery, and they have amassed a credit-card tab of $70,000? The medical bills for the surgery and hospitalization will surpass the available coverage under Medicare, so that the couple's debt load will undoubtedly be overwhelming and unmanageable. Barring a lottery windfall or some other unexpected resource, the circumstances reasonably and realistically call for a Chapter 7 bankruptcy.

The woman owns a house with her husband which has about $50,000 in equity. After closing costs on an equity loan the proceeds to them would probably be less. The monthly credit card minimum payments add up to more than their Social Security income combined. The couple is sick with worry that they have to give up their house and go into low-rent housing.

Chapter 13 bankruptcy is a payment plan for secured debt

The best way to keep one's home in Washington state when the mortgage payments have fallen behind is to file a Chapter 13 bankruptcy. No other program compels the mortgage holder to accept monthly payments to get the back amounts paid and the loan up-to-date and current. This can sometimes work even where the borrower has received a foreclosure action against the residential property. In such situations, there is an emergency need to consult with an experienced consumer bankruptcy attorney who is familiar with handling Chapter 13 cases.

The basic structure of the Chapter 13 is that it is a payment plan. Monthly payments are made to the Chapter 13 Trustee for a period of 36 to 60 months. The details are set forth in the debtor's Chapter 13 plan, which must be reviewed and approved by the bankruptcy court. The plan will show that all payments on a secured loan (one with collateral such as a house attached to it) will be up-to-date and current by the end of the 36 or 60-month payment plan.

High medical bills are leading the elderly to file bankruptcy

In Washington State and throughout the country, there is a steady flow of people age 65 and over who are filing bankruptcy to obtain debt relief. The biggest cause of this trend is medical bills that older individuals cannot afford to pay. In fact, medical debt is now the biggest single source of bankruptcy filings in the country.

The reasons for the steady increase of older filers is simple. They can permanently wipe out accumulated high medical debt without making any payments, and they can do it very quickly. Medical bills, like credit card bills, are unsecured debt, meaning that the amount owed is not a lien on real estate or other property of the debtor.

Medical debt need not lead to permanent financial crisis

Washington residents are just like everyone else when it comes to predicting their futures: They are not able to do it. One of the most unpredictable aspects of daily life has to do with physical health. If one makes healthy lifestyle and eating choices, chances are good that one will enjoy many years of good health, although there is no guarantee. When an unexpected health crisis arrives, it can result in tremendous medical debt that those affected are completely unprepared to meet.

Even minor health issues can create piles of unpaid medical bills. It seems hospitals charge for anything and everything they can these days, right down to a band-aid a nurse might hand to a patient with a laceration. The only problem with that is that the same band-aid that would cost pennies at a local pharmacy may show up on a medical bill costing as much as $10 a piece.

Bankruptcy is not the easy way out, but might provide fresh start

When money problems become overwhelming, consumers in Washington will likely consider their options. While bankruptcy can help to resolve money problems, it could have an adverse effect on a person's future because it will stay on his or her record for several years. However, if bankruptcy is determined to be the only option, professional legal advice can ease the process.

Chapter 7 bankruptcy can provide almost instant debt relief because the court can discharge all unsecured debts like credit card and medical debt. It comes at a price, though, because the court will appoint a trustee to arrange a liquidation sale of non-exempt assets. Chapter 13 bankruptcy is much less severe, and provides the opportunity to continue paying off debts over three to five years and have remaining balances discharged at the end of the period.