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Towson Maryland Bankruptcy Legal Blog

Bankruptcy rate increasing drastically among seniors

The number of seniors who are filing bankruptcy in Maryland and across the country has been rising starkly in recent years. In most of the cases, the seniors filing for bankruptcy protection made less money than the population at large. Among senior households that filed for bankruptcy during the year 2016, 78% had less than the median annual income. In that year, bankruptcy filings by people 65 years old or older accounted for 12% of the total filings; that figure in 1991 was only 2%.

There are a number of factors that have led to the increase in bankruptcy filings by older Americans. Wages have remained steady despite increases due to inflation, unions have lost power, and pension plans are less reliable. The rise in the cost of medical care, too, has significantly impacted the financial standing of older Americans, who need health care more often than their younger counterparts. Another major factor is the increase in financial predators, who market credit cards and other debt instruments to seniors even after they've just filed bankruptcy.

The protection of an automatic stay in Chapter 13 bankruptcy

Most people who file for bankruptcy do so because their financial circumstances leave them with very few alternative options. Some people have to file after their debt slowly increases month after month for a protracted amount of time.

Other people can have a sudden need for bankruptcy protections, such as when they incur large amounts of debt in a short amount of time, possibly due to a catastrophic medical event or accident. Regardless of why you find yourself considering Chapter 13 bankruptcy, you will likely benefit from one of its most important protections, known as the automatic stay.

Determining the right time to file for bankruptcy

In Maryland and across the United States, people experiencing heavy debt may want to file for Chapter 7 bankruptcy. Chapter 7 and Chapter 13 offer two types of bankruptcy for people facing serious financial challenges. A person who files Chapter 7 bankruptcy liquidates all unsecured debts, which means that the debtor no longer owes money to their creditors.

Chapter 7 bankruptcy may also include any non-exempt equity the person may have in a property or vehicle for the purpose of paying back creditors. The entire procedure is completed within three to six months. However, a person must take a "means" test before filing. The first half of the test considers the debtor's earnings and compares them to the average income of similar households. A person who is living below the median has the option to file.

Student loan debt and bankruptcy

Student loan debt may be a major factor in some Maryland bankruptcy filings even though those obligations generally cannot be discharged. A study by the company LendEDU found that almost one-third of people who filed for Chapter 7 bankruptcy had outstanding student loans. Almost half of the total debt of that group on average was student loans. This means that even after these consumers file for bankruptcy, they still must pay off a substantial part of their debt load.

The study only looked at Chapter 7 filers and not people filing for Chapter 13 bankruptcy. With a Chapter 13 filing, people make an arrangement to pay off their debts over a period of three or five years. People with student loan debt who file for bankruptcy may have significant other obligations, such as credit cards and medical bills. They may then use the money they would otherwise have used for those debts to put toward their student loans.

Chapter 7 bankruptcy can help clear debts and ease worries

Overwhelming debt is a common problem for Maryland residents. Those who are facing this issue might function under negative preconceived notions about bankruptcy. For many, bankruptcy is a useful strategy for moving forward without being weighed down by immense debt. Some individuals who have filed for Chapter 7 bankruptcy tout the process as one of the smartest things they have ever done.

Concerns about bankruptcy are many. Still, according to those who successfully filed, the overall benefits of Chapter 7 are undeniable. Fear can be mitigated by eliminating medical debt, credit card balances and more. The freedom from debt lets people restart their lives. Contrary to what some may believe, some filers can rebuild their credit relatively quickly.

Chapter 13 bankruptcy: Are there any drawbacks?

If you find yourself in financial trouble, it may not be long before you learn more about Chapter 13 bankruptcy.

There are many benefits of filing for Chapter 13 bankruptcy, including the opportunity to stop foreclosure and reorganize some of your debt.

Chapter 13 bankruptcy can help you stay in your home

All kinds of people, including those who make decent money and have substantial assets, can find themselves in a financially complicated situation. Whether you missed work due to an illness or just overextend yourself trying to keep up with the Joneses, it doesn't take long for that to start ruining your life.

By the time you're struggling to make mortgage payments or falling behind on credit cards, you may need to start considering options for debt relief. The good news is that contrary to what many people think, you may be able to save some or all of your assets during bankruptcy. For those whose income exceeds the state median or who have sizable assets, it may be possible to seek relief under Chapter 13 bankruptcy.

Chapter 13 bankruptcy can prevent repossession of your vehicle

Falling behind on bill payments and debts is a stressful situation for anyone to deal with. It is particularly frustrating and difficult for those who have had to finance important purchases. These items that you finance are vulnerable to repossession if you fail to make all payments in a timely manner.

Vehicles, furniture and even electronic items that you need for work may cost more than you can afford to pay all at once. When you decide to finance them, your continued possession of the items is contingent on your timely payments of the loan. If you fall behind, even by a month or two, the company in question could attempt to repossess the items that you rely on for daily life.

Yes, you can file Chapter 13 with major assets or higher income

Social myths about bankruptcy are so persistent and popular that many people believe them without question. Unfortunately, that may leave a significant number of people cut off from the benefit of bankruptcy. They may inaccurately believe, for example, that only people with relatively low incomes qualify for bankruptcy protections.

The reality is that anyone can wind up in overwhelming debt. In fact, those who have higher incomes may feel more pressure to spend beyond their means to maintain appearances. The government understands this, and there is a bankruptcy option even for those with higher incomes or substantial personal assets, such as a home.

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