Dealing with debt during the pandemic

We are living in unprecedented times: the shut down from the pandemic, job loss, job furloughs, lost wages, small businesses still not open or closed for good, increased living expenses from staying at home, increased food and transportation costs and the stress from riots and curfews over social injustices. It is safe to say most, if not all of us, are suffering financial loss.

Recently, USA Today reported that 59% of Americans were living paycheck to paycheck for a variety of reasons.

If the pandemic financial hardships have pushed you into unmanageable debt, then you may need professional advice. You shouldn’t try to get through it alone. You possibly need a few more tools in your toolbox.

An article online from CNBC gave some advice for dealing with creditors, such as credit card companies. It may surprise you to know how many things are negotiable with your credit card company. Here are some suggestions:

  • Be proactive and contact the company.
  • Explain to them how COVID-19 is affecting your finances.
  • Find out if they have a hardship waiver.
  • Ask if they can refund interest charges or late fees.
  • Request a lower interest rate on card balances.

Knowing when to seek help is good for your health

Anxiety and depression can be silent killers. Taking action to solve financial problems reduces anxiety. Get relief and professional advice now. Learn more about your options.

Ted Stuckenschneider is Board Certified in Consumer Bankruptcy by the American Board of Certification and has been for over 20 years. He has helped counsel thousands of people through financial hardship either through some form of consumer bankruptcy or how to avoid it.

Drowning in medical debt? You have options.

If you’re struggling with medical bills, you’re not alone. About one in five Americans are, and it’s the most common contributing factor to bankruptcy. Luckily, there are some options that may be available to help reduce the debt. Also, medical debt may not hit your credit as hard as other types of debt.

Ask for financial assistance

Depending on your income, you may qualify for a hospital’s financial assistance. By law, all nonprofit hospitals must have financial assistance policies.

Don’t pay the “chargemaster” rate

This is typically the highest rate healthcare providers charge. Insurance companies negotiate to pay a lower rate and you may be able to, as well. One thing to try is to check out fair rates for procedures on the Healthcare Bluebook’s free tool. Once you have the information about what rate would be fair, go back to your healthcare provider and see if they will reduce what you owe. Be persistent. It may take a long time to reach a payment you can afford.

Be aware that other bills damage your credit more

Although different credit scoring models have different results, many of them take medical debt less into account than other types of debt. For example, the most recent FICO scoring ignores medical collections where the original unpaid balance was less than $100. Also, once medical debt is in collections, the collection agency has to wait 180 days to pursue the debt in order to give insurance time to kick in. Moreover, the three main credit reporting agencies will remove medical debt from your credit report if an insurance company ultimately pays it.

Don’t pay medical debt with a credit card

Doing this takes away the protections from collecting medical debt. Also, it may not be any easier to pay off the resulting credit card debt, which will generally be at a much higher interest rate. Covering a medical bill with a credit card should be your last resort.

Medical debt stays on your credit score for seven years

Although bankruptcy stays on your credit for ten years most filers experience their credit rehabilitated in eighteen to twenty-six months, because all of their old debt was discharged. If you do not file, keep in mind that in Alabama the statute of limitations on collecting medical debt is generally six years. After that, the debt becomes uncollectable.

Bankruptcy is an option

Unlike some other kinds of debt, medical bills can be discharged in bankruptcy. You may qualify for Chapter 7, which wipes out most types of debt, or Chapter 13, which creates an affordable repayment plan for your debts.

To discuss debt relief options or how to file for bankruptcy, contact an experienced bankruptcy attorney.

5 choices to relieve your debt

Though nobody loves being broke, making just enough to get by, I have heard the phrase, “I can live with being broke, but being in debt stinks.”

Trying to manage oppressive debt is an incredible burden to handle. With debt comes financial stress and anxiety, which in turn has hurt you and your relationships. Getting out of debt can be a tall task, but it certainly isn’t impossible.

If you decide you want to get out of debt, you have five options.

  1. Make more money.

Whether you accomplish this through a promotion, a second or third job or a legal side hustle, you should put the maximum amount of additional income toward your debts. When and if the debt becomes more reasonable, continue placing the maximum amount of extra income toward paying off your debts, while also understanding that you must also take care of yourself.

  1. Lower your expenses.

This strategy could include downsizing, cutting out anything that isn’t necessary (cable, streaming subscriptions, selling your car if you can live without it, etc.), or a mixture of both.

This strategy consists of doing whatever it takes, aside from making yourself homeless, to free up funds to pay off your debts. If may not be a fun decision but is seen as a necessary evil to get the debt weight off your back.

  1. Make payments (and extra payments).

Maybe you’re doing financially well, but just made some poor financial decisions, like racking up thousands of dollars on credit cards, and if you don’t make a drastic change, things could get majorly out of hand. If this if the case, make payments and pay more than the minimum. Especially with credit cards that generally have high-interest rates, making the minimum payment is like flushing money down the toilet.

Unless you owe a meager amount, which in these instances, wouldn’t be the case, the minimum payments are eaten up by the interest. Continuing down that path would see you paying thousands more over the life of your debt. Pay more and, if able, put money toward a couple of extra payments each month to stave off the accruing interest.

  1. File for bankruptcy.

Filing for bankruptcy seems scary, but it’s relatively common. More than 760,000 people made the conscious decision to file for personal bankruptcy in 2017, working toward clearing their oppressive debt. If you choose to file for personal bankruptcy, you have two options: Chapter 7 and Chapter 13.

Chapter 7 bankruptcy is commonly known as “liquidation bankruptcy,” where your non-exempt property, like your house or car, (if you have too much equity in them) is used to pay off your debts. Non-exempt assets change from state to state, because what is exempt changes from state to state. Chapter 7 is a common choice for individuals who don’t have much disposable income to put toward a repayment plan and their assets fit within the state’s exemptions.

Chapter 13 is a good choice for those who do have enough income to begin a repayment process. Once approved, creditors can no longer harass you or take legal action against you to collect their owed debts. Chapter 13 also halts the foreclosure process, which allows you time to catch up on your mortgage payments.

No matter the bankruptcy decision you make you will feel a sense of relief as the debt load will have been taken off your back, giving you a fresh start.

  1. Do nothing.

Really? Doing nothing does not solve the problem and matters only continue to get worse. You are already reading this blog because you know you need to do something.

Is a Chapter 13 bankruptcy right for you?

Between a mortgage, car loans, medical bills, credit cards and more, you can face many debts. And when you support a family, your paycheck may not cover all the bills you have. You may have reached the point where your debt is unmanageable. When you reach this point, bankruptcy can offer you relief.

But when you think about declaring bankruptcy, you may worry that you will lose all your possessions, including your family home. However, you may be able to use Chapter 13 bankruptcy to keep your belongings and pay off most of your debt. Depending on your specific situation, Chapter 13 could be right for you.

Creating a payment plan

When you file for Chapter 13, you consolidate your debt and create a payment plan. Any bill that you owe goes into this plan. Instead of paying each one individually, you pay a lump sum to a bankruptcy trustee who pays your creditors. You work with the court to decide how much you will pay each month. Once the plan starts, it can last from three to five years.

Discharge of unsecured debt

At the end of your plan, you may still have unsecured debt, like credit card or medical bills. The judge can discharge unsecured debt at the end of your three-to-five-year payment plan, which removes your obligation to pay it.

Controlling your ability to pay off your debt

A Chapter 13 filing lets you pay off creditors in a controlled setting. This type of bankruptcy makes sure you don’t lose your house or belongings while you pay your debt. You can keep stability for your family while improving your financial future.

If you go through a successful Chapter 13 bankruptcy, you can come out the other end free from unpaid debt. The process can let you reset your finances and start fresh for your future without losing any of your important possessions.