The Purpose of Bankruptcy

No one ever really wants to file for bankruptcy, but there are times when it can be unavoidable for many.  People will want to file for bankruptcy if they have quite a bit of debt and no way to possibly pay it off during their lifetime.

The main purpose of bankruptcy is to give everyone a fresh start in life without a mountain of debt hanging over their head, while also allowing their creditors to collect at least some of the money that is owed to them.  After paying their creditors the amount that the bankruptcy courts tell them to, they will no longer be responsible for any of their remaining debt to those creditors.

There are six different types of bankruptcy filing options, although, only two of them are meant for regular people.  Chapter 7 bankruptcy will find people liquidating everything that they own to pay off their debts, while Chapter 13 will allow a person to keep their home as they are repaying all their creditors.  However, both options will allow everyone to keep most of their property and assets in the end if they qualify for certain exemptions.

The other four bankruptcy options include Chapter 9, Chapter 11, Chapter 12, and Chapter 15.  Chapter 9 can only be filed by a municipality and basically requests a reorganization process for that area.  Chapter 11 is usually used by commercial organizations as they try to reorganize their assets to pay off debts.

Chapter 12 is the bankruptcy code that farmers and fishermen need to file under if their business is not going well due to circumstances out of their control.  Through this process, a bankruptcy lawyer can help them create a plan to get out of debt within three years, unless the court allows for a longer time frame.

Chapter 15 is for cross-border cases, where the creditor and debtor live in different countries.

Everyone is encouraged to hire a bankruptcy lawyer to assist them through the entire bankruptcy process, so that they can file for the proper chapter of bankruptcy.  After all, the entire bankruptcy system is quite complex and there are many legal terms and phrases that people may not know or understand.  It can be quite easy for a person to get lost in the process, which is why the guidance of a bankruptcy lawyer is always a good option.

Anyone that chooses to not hire a bankruptcy lawyer may find themselves worse than they were before, especially if they need to pay their creditors more than they should in a shorter amount of time.  The goal of bankruptcy is to get out of debt and move on with life, not continue to feel stuck for a longer period of time.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

Brookstone files for bankruptcy and will close all of its mall stores

Brookstone filed for bankruptcy and will close its remaining 101 mall stores.

The mall and airport seller, best known for massage chairs, quirky gadgets, and travel luggage, filed for Chapter 11 bankruptcy in federal court on Thursday. It was Brookstone’s second bankruptcy round in four years.

The company will keep its 35 airport stores and website open and running while it attempts to find a buyer.

It has secured a $30 million loan to finance operations during the sale. In a bankruptcy filing, Brookstone said it had liabilities totaling up to $500 million and assets between $50 to $100 million.

Brookstone’s CEO said in a statement that its airport and online businesses were successful, but an “extremely challenging retail environment at malls” forced the company to close its stores there.

Unabated traffic losses at malls have plagued brick-and-mortar sellers. Mall vacancies reached a six-year highlast quarter as a wave of stores closed, including Walgreens, Bon-Ton, Sears and Kmart, Best Buy, Kay and Jared, Matress Firm, and GNC.

“They’re trapped in hundreds of these B and C malls, whose traffic has been in serial decline,” said Mark Cohen, the director of retail studies at Columbia Business School. “Where they are in triple-A malls, they’re faced with very high rent.”

The company got its start in 1965 with a classified ad in Popular Mechanics magazine for hard-to-find tools. Brookstone opened its first retail store in 1973 and moved into malls in 1980. It later opened smaller airport stores.

“Brookstone had a unique value proposition,” said Sean Maharaj, a director in the retail practice of consultancy firm AArete. “They had a sophisticated offering. It was more boutique-like and felt a little white glove.”

Best-selling products in Brookstone’s history include the Big Blue Bluetooth speakers, Nap weighted blankets, and Rock & Recline Shiatsu massage chairs, according to a spokesperson for the company. It was a launching pad for popular brands such as Tempur-Pedic, Fitbit, Indiegogo, and Segway.

The company also had a thriving catalog business during those years, selling consumers moderately priced novelty items. In 2006, the last year public filings were available for the company, it circulated close to 60 million catalogs.

“We believe our strength is identifying, developing and selling products that are functional in purpose, distinctive in quality and design and not widely available from other retailers,” Brookstone said in the filing.

In the mid 1990s, Bain Capital, then led by Mitt Romney, took the company public. It operated publicly for close to a decade and then was sold in 2005 to a group of buyers that included a private equity firm in the United States and a Chinese-based retailer.

brookstone mall store

“When the company went private it was probably coming off of the most successful run in its history,” Steven Schwartz, Brookstone’s former chief merchandising officer and interim CEO, said in a phone interview last week.

The two ownership groups did not share the same priorities and Brookstone cycled through around 10 CEOs during the same stretch, Schwartz said. Turnover made it hard to implement a consistent strategy and vision.

“We were an amazing store company, but we didn’t have our eyes on the ball the right way digitally,” he said.

In 2014, Brookstone filed for bankruptcy and was sold to a Chinese consortium for $136 million. At the time, Brookstone operated 240 stores, 70 fewer than it had in 2006.

As the company struggled internally, shoppers found more places online to buy the speakers, headphones, and tech tools they once were only able to get at Brookstone or rivals like Sharper Image.

“The category is Amazon bait,” said Columbia’s Cohen. Smartphones and apps, not gadgets, satisfy many consumers’ hunt for new technology.

“They weren’t able to support the endless procession of new and engaging ideas and categories that a consumer who is curious expects,” he said. “It’s a treadmill that’s difficult to stay on.”

Brookstone was known as a place where shoppers could find innovative gifts, usually for men, Schwartz said. (Its headquarters in New Hampshire are located at One Innovation Way.)

Customers didn’t always know what they wanted when they went into a store, but they would wander around, try out products, and purchase an audio or travel product they found useful and engaging.

Brookstone had difficulty distinguishing itself from new competitors and telling its story online, where it’s harder to shop without knowing exactly what you want. It lost relevancy with many shoppers and fell out of mind.

The company’s troubles were an early sign of legacy retailers grappling with creating a new digital identity, Schwartz said: “We were the canary in the coal mine for the internet and for the digital age.”

Original Source: https://money.cnn.com/2018/08/02/news/companies/brookstone-bankruptcy/index.html

Original Author: Nathaniel Meyersohn

Financial worries: Why waiting to file bankruptcy can be so damaging

A new study shows millennials are delaying life events due to being in debt. Elizabeth Keatinge has more. Buzz60

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Filing for bankruptcy is often seen as an admission of personal and financial failure. Many people try hard to avoid it, but they end up paying the price for waiting.

The longer people wait to file bankruptcy, the more they struggle, according to a 2018 law review study. By the time they declare bankruptcy, their well-being and financial life are damaged, undermining the fresh start the legal tool offers them.

Here’s why waiting to file bankruptcy can be so damaging — and when you should consider filing.

Why waiting is draining

The time before a person files for bankruptcy is sometimes known as the financial “sweatbox.” That’s the period when people are facing asset depletion, debt collection lawsuits and forgoing basic necessities like food to avoid filing bankruptcy.

Many sweat it out for years before reckoning with their debt. The misery of the sweatbox is an increasingly common American experience, a new report from the Notre Dame Law Review titled “Life in the Sweatbox” finds.

The report uses data from the Consumer Bankruptcy Project, a long-term academic research project that studies people who file bankruptcy, why they file and the consequences. The current CBP data include information from 3,200 bankruptcy cases between 2013 and 2016. “Life in the Sweatbox” also features CBP survey information from 910 of the 3,200 filers.

The report shows that among those surveyed, over 66% were “long strugglers,” or those who endure the sweatbox for two years or longer. Nearly a third waited five years or longer. Compared with the 2007 CBP, the number of long strugglers who waited five years or longer more than doubled in the latest CBP data.

The longer people stay in the sweatbox, the worst their overall financial situation becomes:

  • Long strugglers have half the median assets compared with other debtors, or those who didn’t wait two or more years to file bankruptcy
  • The median debt-to-income ratio of long strugglers is over 40% higher than other debtors
  • Around 50% of long strugglers faced debt collection lawsuits, compared with 35% of other debtors

Stigma against filing and dedication to paying debts are part of what keep people from filing bankruptcy, says co-author of the report Robert Lawless, a professor at the University of Illinois College of Law.

“Bankruptcy laws give the honest but unfortunate debtor a fresh start. It goes into the American idea of everyone deserving a second start,” Lawless says. “The discharge is the core of the fresh start: A chance to start financial life anew.”

But the prolonged depletion of assets during the “sweatbox” means that by the time people file, they’re unable to have a true fresh start, he adds.

With less in the bank, it’s harder for them to find sturdy financial footing post-bankruptcy.

When to consider bankruptcy

Kristen Holt, CEO of GreenPath Financial Wellness based in Michigan, says clients often tell the nonprofit credit counseling agency that they wish they had reached out for help sooner.

“We encourage them to call a credit counseling agency the moment they begin to feel stress,” she says.

Here are some factors that can help you determine if bankruptcy is right for you:

  • Your debts are more than 40% your income. This debt-to-income ratio is a marker of potential financial distress, according to the Federal Reserve, and can indicate that your debts are too high to pay off on your own.
  • You’re using debt to pay for other debts. At this point, you’re slipping further down the debt spiral, and it can be hard to recover without a serious financial windfall.
  • Your debts are ones that could be wiped out in bankruptcy. Unsecured consumer debts, like credit cards, medical bills and personal loans, can all be discharged in bankruptcy. Other debts, like student loans and some court judgments, cannot be eliminated.
  • You’re forgoing essentials. Sixty-percent of long strugglers surveyed in the law review report went without medical attention while in the sweatbox. And nearly 32% went without food.

The two most common forms of consumer bankruptcy are Chapter 7 and Chapter 13. Which is best for you depends on your specific financial situation. Consult with a bankruptcy attorney and nonprofit credit counselor if you’re considering filing.

If you do file for bankruptcy, it’s not the end of your financial life.

Your credit score is likely to improve in the months after filing. A 2014 report from the Federal Reserve Bank of Philadelphia found that the average credit score among those who filed Chapter 7 bankruptcy in 2010 went up more than 80 points — from 538.2 to 620.3 — between when they filed and when their cases were discharged.

Original Source: https://www.usatoday.com/story/money/personalfinance/2018/06/20/financial-damage-why-waiting-file-bankruptcy-can-hurt-you/715663002/

Original Date: June 20 2018

Written By: Sean Pyles

The Truth About Bankruptcy In 2018

Many people these days find themselves in serious financial trouble and things have gotten so bad that they feel that they don’t know what to do anymore. Being in that situation has to be extremely scary as your creditors are not likely going to be understanding when you cannot pay them even the minimum amount due.

 

It gets even worse for you if you own your home and you are not able to afford your mortgage and the bank is threatening to take away your home. There is are not really whole on of things for you to do if you have gotten to the point where you can longer afford make all of your payments. One of the last resorts is a legal proceeding called bankruptcy.

What is bankruptcy

A bankruptcy is a legal proceeding in which you face a judge and you tell them that you no longer have the means to continue to pay your debts. The judge will appoint a trustee and they will evaluate your debts and your income in order to determine if they think your debts should be discharged. Fortunately, if you own your home, a foreclosure can be stopped, and you will not lose your home. However, there are certain debts that are not covered by bankruptcy and you will still responsible for paying them once your bankruptcy has been discharged.

 

Here are a few examples of debts that cannot be discharged by a bankruptcy;

  • Student Loans
  • Tax debts, fines or penalties from the government
  • Court-ordered child support payments
  • Court ordered alimony payments

 

Filing Bankruptcy will temporarily stop the harassing phone calls from creditors wanting their money, but once you have filed bankruptcy, they must immediately cease all forms of contact until after your bankruptcy has been finally decided by the judge. All decisions by the courts are final and when they discharge your case you will ready to start over.

 

However, you might really want to be sure that you think it completely through because you will have poor credit for many, many years once it hits your credit report. Once it is where it normally stays for at least 7 years and it will likely keep you from getting any new credit.

 

There are things that you can consider before taking the bankruptcy route that will not put your credit at risk and that includes finding a lender to request a debt consolidation loan. This will make it possible for you to pay off the debts and stave off foreclosure and bankruptcy.

 

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

Why Should You File for Bankruptcy?

You are always going to have bills to pay, but what happens if they come in faster than you can pay them, or you are barely paying the minimum payment every month?  You may feel like you are drowning in debt, especially if you need to continue using your charge cards to pay for everyday necessities.

While filing for bankruptcy is never a person’s top choice, you may have no choice but to hire a bankruptcy lawyer, so you can get back on track with your life.  After all, once you have gone through the process and then work hard to improve your credit, you will find that your life is much easier in the future.

An attorney specializing in bankruptcy can walk you through all the steps of the process, starting with whether or not you have a good reason to file.  Your bankruptcy lawyer may even encourage you not to file for bankruptcy if they do not think that you have a good enough reason.

Here are 5 reasons why you should file for bankruptcy:

  1. Your Home is in Foreclosure

A bankruptcy will immediately put a stop to the foreclosure on your home.  This is important, even if you are not planning on staying in your home, because you may not need to pay the difference of the unpaid mortgage balance if the proceeds from the sale are not enough.

  1. You are Being Evicted

If you happen to rent an apartment or a house, filing for bankruptcy can prevent you from being evicted.  You will still need to catch up on your rent payments, but a bankruptcy can give you a little more time.

  1. Your Car is Being Repossessed

Filing for bankruptcy can prevent a lender from repossessing your car if you are behind on payments.  This will allow you to catch up on payments, so you can keep your car.

  1. You Have Medical Debt

If you have major medical debt from an illness, you should talk to a bankruptcy lawyer, so you are not responsible for all those bills.  They can give you your options, so you do not lose your home or other assets.

  1. You Just Got Divorced

Financial changes occur after a divorce and you may find that it is difficult to live the lifestyle that you are used to with just your income.  If you find yourself in debt after getting a divorce, you will want to speak to an attorney specializing in bankruptcy to see what options you may have.

 

No one ever wants to have a lot of debt to deal with, but bankruptcy may or may not be your best option.  They only way you will know if you should file is to speak with a bankruptcy lawyer and see what they recommend for the situation that you are in.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

Getting Your Financial Future in Order with Bankruptcy

Although we don’t intentionally do it, sometimes we make ill-advised financial moves that lead to bankruptcy. While filing for bankruptcy can provide a reprieve for those who are unable to repay their debts, there are consequences which may affect your future, for instance:

  • Bankruptcy may place some restrictions on your employment or running a business
  • It doesn’t necessarily release from all debts, and your trustee may sell all your assets
  • Your name may permanently appear on the National Personal Insolvency Index (NPII)
  • You must inform a credit provider of your bankruptcy when trying to obtain future credit
  • While bankruptcy lasts for three years and a day, your trustee can lodge an objection to extend the bankruptcy for up to eight years

Do not be discouraged because there is life after bankruptcy. First, a good bankruptcy attorney can help you in initializing a debt management plan and ensure that you attend credit counseling sessions where you can receive free advice on important steps to take in the future to help you abate the damaging impact of insolvency.

There is no denying that bankruptcy can be a daunting and very emotional decision, however, having a bankruptcy lawyer by your side, he or she can help you find various debt relief options that may be available to you and most importantly, he or she can stop creditors from harassing you. It is also your bankruptcy attorney’s duty to help you negotiate, review and sign any reaffirmation agreements on secured property that you want to keep. Your bankruptcy attorney may appear in further court required appearances on your behalf to satisfy the bankruptcy court’s administrative requirements. While that is happening, consider the following ways of getting your financial future in order after filing for bankruptcy:

  • Stick to a budget

If living beyond your means is what may have got you in a bankruptcy pickle, creating and sticking to a realistic budget will help you become extra vigilant about your finances and prevent you from incurring unnecessary debts.

  • Set up automatic bill payments

One of the single, most important things you can do to restore your finances and your credit is making it a priority to pay all your current bills on time and offset any existing bills that you may have accrued in the past.

  • Get a secured credit card

By obtaining a secured credit card, you start depositing a prearranged amount of money into a bank account, which becomes your credit limit. Charging small amounts each month and repaying your debts as agreed is yet another strategy to rebuild your credit rating after bankruptcy.

  • Save

Now that you’re free from most of the debt, it’s up to you to manage your money. Start by building an emergency fund. Also look for financial coaching offered by various financial advisers to help you in managing and keeping your finances in check.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

When Chapter 13 Bankruptcy Is Better Than Chapter 7

If you’ve reached the point where you’re swimming in debt and can’t pay your bills, you may be wondering which type of bankruptcy is best. You may need a Chapter 7 bankruptcy lawyer or a Chapter 13 bankruptcy attorney. There are differences between each type.

Bankruptcy is never a simple process in the United States. Each type depends on your current income, assets, debts, and future financial goals.

Chapter 7 bankruptcy is a type of liquidation bankruptcy that will clear out any unsecured debts you may have, including medical bills, and credit card balances. To declare Chapter 7 bankruptcy, you must currently have no income or little income. If you make over a certain amount of money, you’ll automatically have to claim for Chapter 13 bankruptcy.

Chapter 13 bankruptcy is a type of reorganization bankruptcy. You must have a regular income and be able to pay back a portion of your debts through a repayment plan. There can be many benefits for filing for this type of bankruptcy than Chapter 7.

Chapter 13 bankruptcy will allow you to catch up on your missed mortgage payments. It may also allow you to clear unsecured liens on your house. This means that you will be able to keep your house, unlike filing for Chapter 7 where you can lose your property. You may also keep your nonexempt assets. How it works it that you pay back all or a portion of your debts through a repayment plan. This plan is based on your current income against expenses, and what types of debt you may have. Therefore, it’s commonly referred to as “reorganization bankruptcy”.

Another benefit is that Chapter 13 will allow you to get caught up with car loans without losing your car, and to pay off other non-dischargeable debts including alimony or child support arrears. In order to hire a Chapter 13 bankruptcy attorney, you must be an individual and not a business. For Chapter 13, you must not have more than $394,7255 of unsecured debt or $1,184,200 of secured debt. While the discharge is a lot longer with Chapter 13 than Chapter 7, 3-5 years versus 3-5 months, you’ll receive a full discharge.

It’s important to note that if you own property, Chapter 13 is a lot better than Chapter 7, as debtors will be able to keep all their property, whereas the trustee in Chapter 7 will sell your property to pay off your creditors. Your liens will also be stripped in Chapter 13, whereas in Chapter 7 they are not, leaving you with future debt loads to pay off in the future.

Before deciding which type of bankruptcy is right for you, you should talk to a Chapter 7 bankruptcy lawyer, or a Chapter 13 bankruptcy attorney, to get the best advice that pertains to your financial situation. You may just discover that you do qualify for Chapter 13 and will be able to keep your house and car!

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

Not All Debts Are Treated Equally When Filing For Bankruptcy

With a struggling economic climate, millions of people file for bankruptcy every year for varied reasons, most notably due to medical expenses, reduced income or job loss. According to US bankruptcy court statistics, personal bankruptcy has increased at an alarming rate and not just as a result of irresponsible spending, but because something like a divorce means taking on a partner’s debt if you had “regrettably” co-signed or opened joint accounts with them.

Filing For Bankruptcy

Unexpected catastrophes can also quickly drain savings that took years to accumulate including mountains of student loans, the rising costs of utility payments, inflation, foreclosure the list is endless. Bankruptcy laws are in place to give people whose finances have collapsed and need a second chance to start over. According to statistics from the American Bankruptcy Institute, nearly 95% of Chapter 7 bankruptcy cases decided in 2016 were discharged, meaning the individual was no longer legally required to pay the debt. But what about the other 4.5%?

If you are contemplating bankruptcy, you should consider discussing your options with an experienced bankruptcy attorney who works on liquidation bankruptcies where most of your debts are discharged or liquidated under bankruptcy law. A bankruptcy lawyer will also help you in compiling all your financial records, including debts, assets, income, and expenses.

The Length of Bankruptcy Process

Once you have filed for bankruptcy, the process usually takes six months or longer to complete, but the good thing is that during this time it triggers the automatic stay that prevents creditors from calling you, suing you, sending you letters, or even repossessing your property.

Items Not Discharged In Bankruptcy

When your petition is accepted, your case is assigned to a court trustee who then sets up a meeting with your creditors that you must attend. But not all petitions are accepted, for example; student loans are not discharged under a declaration of bankruptcy owing to the fact they are funded or guaranteed by the government and students are required to pay them off once they start working.

Another example of a non-dischargeable that can’t be in a Chapter 7 bankruptcy at are debts from a divorce because they are owed to a spouse but not as a domestic obligation. However, they can be included in a chapter 13 bankruptcy provided the debt becomes part of a payment plan, and the overdue payments will be continued and paid in full.

A debt incurred through fraudulent means, including one that was obtained to take advantage of the bankruptcy code, cannot be discharged. Unemployment benefits overpayments that you may be required to repay the excess, tax penalties, fines on speeding tickets and vehicle registration fees will also not be discharged in a bankruptcy.

Also, fees that are considered a priority debt, meaning you owe the federal government or local state in payroll taxes, past tax debts from previous years, current tax liability, any fees or penalties cannot be discharged under a declaration of bankruptcy, therefore, you must make an effort to pay or deal with the IRS directly.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

 

It’s A New Year and Time for You to Get Your Finances In Order

It’s now 2018 and time to get a new start on your life. If your finances have suffered miserably in past years, it’s now a new year and time for you to get your finances in order. Many people have increasing amounts of debt from mortgages, car loans, student loans, medical bills, and credit card debt. Often it can become unmanageable and you can feel like there is nothing to look forward to.  There is help, there is a way to forgive some or all your debts.  A bankruptcy attorney can help facilitate filing for chapter 7 or chapter 13 bankruptcy.

Filing for the Right Chapter

Without the assistance of a local bankruptcy attorney many people end up confusing the two chapters of bankruptcy. To get back on track in life, you should have a solid understanding of what each one offers to your future, and your finances. It can be a serious condition to have to file for bankruptcy, and both can affect your future.  It’s important to file for the one that’s right for you, so you can get back to good finances in the future.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a certain liquidation bankruptcy that is made to rid you of unsecured debts. These may involve credit card debt or medical bills. To qualify for chapter 7 bankruptcy, you must currently have no income, or little disposable income. If you make too much money, you automatically must file for Chapter 13 instead.

Chapter 7 bankruptcy involves selling any property that you own so creditors can be paid back. If you have no assets, they won’t get anything. This type of Chapter 7 bankruptcy is best for low income or no-income people who have few or no assets.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is best for debtors who have a regular income. They can pay back at least some of their debts on a regular payment schedule. This is the path you’ll take if you don’t qualify for chapter 7. Even if you qualify for chapter 7, many debtors may decide to go the route of chapter 13. This is because there are additional benefits in 13 that 7 doesn’t have.

The benefits of chapter 13 bankruptcy include the ability to catch up on missed mortgage payments without losing your home. You may also be able to remove any unsecured junior liens from your house.  With chapter 13 bankruptcy, you’ll be able to keep your house or property. This will also include non-exempt assets. To qualify for chapter 13, you must repay your debt through a special repayment plan.

The amount you pay back will depend on your current income, expenses, and your type of debt. Therefore chapter 13 is commonly called a reorganization bankruptcy. It’s meant strictly for debtors who can afford to make monthly payments and get caught up on car payments, child support arrears, or alimony debts.

Know Your Rights

It’s important to be aware of your rights if you choose to file for chapter 7 or chapter 13 bankruptcy. Choose the route that’s most pertinent to you. Now you’ll be on your way to financial freedom.

Bohikian Law Group specializes in chapter 7 and chapter 13 bankruptcies in Michigan. Contact us today to find a bankruptcy attorney that will help you in debt relief at http://www.bohikianlaw.com/ today.

 

More Retirees Than Ever Are Filing for Bankruptcy — Here’s Why

Bankruptcy is a growing problem for older Americans — even those who are financially responsible.

Most people think bankruptcy is something they’ll never have to go through. You may think that because you’re diligent about spending less than you earn and avoiding excessive debt, you could never go bankrupt.

However, the number of people filing for bankruptcy is increasing, especially among seniors. People aged 55 and older account for about 20% of total bankruptcy filings — a number that’s doubled since 1994, according to a study from Debt.org. And even financially responsible people go bankrupt far more often than you might expect.

So why do so many people file for bankruptcy? There are many reasons, but the most common is outstanding medical bills.

Petition for bankruptcy forms

Image source: Getty Images.

When medical bills break the bank

Roughly a quarter of American households are struggling to pay their medical bills, according to the Kaiser Family Foundation revealed. And if you think health insurance protects people from crushing medical debt, consider that 10 million Americans with year-round health insurance coverage are struggling to pay their medical bills, according to NerdWallet Health.

Seniors aren’t immune to this struggle either. Many retirees (incorrectly) assume that Medicare is their ticket to low healthcare expenses, but even Medicare has its gaps. For example, Medicare doesn’t cover routine eye care, dental care, or hearing aids, and it also doesn’t cover long-term care — which can be ruinously expensive. In addition, you’re responsible for paying deductibles, copays, and coinsurance, and these costs add up quickly — in fact, the average 65-year-old couple retiring today can expect to pay upwards of $275,000 in medical bills during retirement.

Seniors are especially prone to high medical bills, as they’re more likely to develop expensive health conditions. Although older Americans age 65 and up only make up 12% of the population, they account for 34% of prescription drug usage and 35% of hospital stays, according to the Center for Disease Control and the Department of Health and Human Services — and a single trip to the hospital can cost tens of thousands of dollars.

What you can do to avoid bankruptcy

While there’s no surefire way to avoid health problems and the resulting medical bills, you can take a few steps to protect yourself from skyrocketing healthcare costs.

First, make sure you have an emergency fund that covers three to six months’ worth of expenses. Roughly a quarter of American adults have nothing at all saved in an emergency fund, according to a Bankrate.com survey, but what’s more worrisome is that 32% of soon-to-be retirees aged 53 to 62 have nothing set aside. An emergency fund can help you cover a major one-time expense without taking on a lot of debt or tapping your retirement savings, which can cause you to burn through your nest egg to fast and cost you dearly in future investment gains.

A health savings account is another option for covering medical bills. An HSA allows you to invest pre-tax dollars, let those savings grow free of capital gains and dividend taxes, and then withdraw them tax-free so long as they go toward qualified medical expenses — which can include everything from deductibles to contact lenses to long-term care.

Finally, simply being aware of what you may need to spend on medical expenses can help ensure you’re not blindsided when the bill arrives. Know what Medicare covers (and, more importantly, what it doesn’t), read up on your insurance plan so you know your deductible, copay, out-of-pocket limit, etc., and take a realistic look at your overall health to better plan for any medical expenses you may face down the road. While you can’t predict every health issue, if your family has a history of developing a certain ailment, it’s wise to budget treatment into your savings plan.

Although it’s not fun to think about, bankruptcy is a concern for a growing number of older Americans. As healthcare costs skyrocket, even those who have health insurance and are financially responsible are not immune to the rising medical bills. By being aware of the medical expenses you may face in retirement and preparing accordingly, though, you have a much better chance of avoiding bankruptcy during your golden years.

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Original Post: https://www.fool.com/retirement/2017/12/16/more-retirees-than-ever-are-filing-for-bankruptcy.aspx

Original Author: Katie Brockman

Original Date: Dec 16 2017