Lefkovitz & Lefkovitz
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Nashville Bankruptcy Law Blog

Medical debt may not be the number one cause of bankruptcy

Many studies have suggested medical bills are the number one cause of bankruptcy in the United States. A 2009 study, coauthored by Sen. Elizabeth Warren and physician Dr. David Himmelstein, stated that over 60 percent of bankruptcies were a result of medical debt.

During his 2009 State of the Union, President Barack Obama used this study to state that a medical bankruptcy occurred every 30 seconds in the U.S. This became a talking point that may have helped push through his Affordable Care Act.

No health insurance + big medical bills: How bankruptcy can help

Millions of Americans live without health insurance, and tens of millions of others don't have adequate insurance to cover their bills if significant medical expenses come up. A CDC survey indicated that more than 28 million people under the age of 65 had no health insurance.

While some debate the "number one cause" of bankruptcy, it is evident that vast numbers of people from all walks of life can't afford to get sick or injured, with or without insurance. If you're sitting on thousands (or tens of thousands) of dollars of medical bills that you simply can't pay, you are not alone. The good news is that you may be able to utilize Chapter 7 bankruptcy to wipe out that crushing debt in one fell swoop.

Understanding debt types

Many people living in Tennessee and around the country regard debt as a negative thing. However, the reality is that most people at one point or another will go into debt, often for good reasons. Instead of fearing debt, it is often best for people to take a more balanced look at the reasons, both good and bad, for borrowing money or using credit.

Some types of debt can be perceived as an investment. For example, people take out student loans so that they can receive an education that will help them get a well-paying job after graduation. Similarly, people will obtain a mortgage to buy a home that, hopefully, will increase in value over time.

Will you lose your business if you file for bankruptcy?

Tennessee businesses fall into financial distress for a variety of reasons: economic downturn, risky investments and slow growth are just a few examples. Overtime, debts may accumulate and you may not see a way to repay your creditors.

You know that you have a viable business idea and that it could be profitable, but your amassing debts make that seem increasingly impossible. One option may be filing for Chapter 11 bankruptcy. While many business owners worry that filing for bankruptcy may take away their business, it may actually save it. How can Chapter 11 bankruptcy extend your business's longevity?

Why people wait so long to file for bankruptcy

Tennessee residents who have medical, credit card or any other type of debt that can be discharged through bankruptcy should file as soon a possible. This is also true for those who have a debt-to-income ratio that is higher than 40 percent. The longer a person waits to file, the less likely it is to get a fresh financial start because of asset depletion. In some cases, individuals don't even buy food to help avoid bankruptcy.

A report using data from the Consumer Bankruptcy Project found that in 66 percent of cases, individuals who filed for bankruptcy spent two years or more in what is referred to as the "sweatbox". In some cases, individuals waited five years or more to file. The sweatbox is a time in which individuals are facing lawsuits or foregoing basic needs but have not yet filed for bankruptcy.

What to know about filing for Chapter 13 bankruptcy

When an individual in Tennessee is struggling to pay his or her debt, it may be possible to file for Chapter 13 bankruptcy. Debts are repaid according to a plan approved by the court, and a plan must be submitted within 15 days of filing for bankruptcy. A judge will make a decision as to whether to confirm the plan within 45 days of a meeting with creditors. Creditors then have 25 days to object to a plan.

Debt balances are classified as priority, unsecured and secured. Priority payments include costs related to the filing itself, taxes owed and child support. These obligations must be paid in full unless the creditor agrees to change its status. As a general rule, unsecured creditors will not need to be paid in full over the course of the repayment plan. However, debtors must generally commit disposable income toward paying off unsecured debt.

How to purchase a vehicle while in Chapter 13 bankruptcy

When Tennessee residents file for Chapter 13 bankruptcy, they are given either three or five years to complete the repayment program. During this length of time, it is common for someone to need a new vehicle. Fortunately, it is possible to finance a new car while going through bankruptcy. However, the purchase will require approval from the court.

To begin the process, individuals in Chapter 13 bankruptcy will need to find a lender who is willing to give them a loan. Those who have a pre-existing relationship with a bank or credit union should approach those institutions first. If they get turned down, subprime lenders and dealerships are also options. Subprime companies offer financing to people with poor credit histories.

When bankruptcy meets music: Gibson guitars files for Chapter 11

Nashville is known throughout the world as Music City because of the incredible proliferation of live and recorded musical artistry that has taken root and thrived here. While the music itself is alive and well, many Nashville businesses struggle with financial problems just like individuals do. One example is Gibson Brands, Inc.

An iconic instrument maker for well over a century, Gibson recently filed for Chapter 11 bankruptcy to deal with its debts. The company hopes the reorganization will help it remain in business while it adapts to complex changes in the way music is produced and consumed, according to USA Today.

Understanding Bankruptcy

In 2015, Tennessee had the highest rate of bankruptcy filings in the nation; as a matter of fact, the number of filings there was twice the national average. Ergo, the citizens of this fine state are no strangers to the terror that comes with the possibility of not being able to meet their obligations. Moreover, the entire process of filing for bankruptcy can be confusing given the amount of legal red tape surrounding the whole process. For instance, plenty of people are confounded by the difference between Chapter 7 and Chapter 13 bankruptcy.

Even though both Chapter 7 and Chapter 13 help absolve debtors of their burden, they reach this end in different ways. Chapter 7 dictates that the debtor's non-exempt assets be liquidated. Conversely, Chapter 13 allows a debtor to restructure their debt and enter into a repayment plan.

Bankruptcy pros and cons: How much can I discharge in Chapter 7?

Living in serious debt can be an incredibly stressful experience. With the powerless feeling of not being able to pay your bills and the constant harassment from creditors, it can seem like a nightmare from which you can't wake up.

Enter Chapter 7. For consumers who qualify for it, this type of "liquidation" bankruptcy can be a godsend. Many people who have explored the possibility of filing for Chapter 7 may wonder how much of their debt can be discharged -- effectively wiped out, removed -- in the bankruptcy process. Here are some important basics to know.

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Nashville Office
618 Church Street, Suite 410
Nashville, TN 37219

Phone: 615-686-2279
Fax: 615-255-4516
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Cookeville, TN 38501

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