But why?

Why is the general consensus that filing for bankruptcy is a bad thing? While it is true that filing for bankruptcy is evidence of trouble with personal finances, that’s not the whole story.

A large part of the reason why people say bankruptcy is bad is because they don’t understand the process. No two bankruptcy cases are alike and consumers are forced into bankruptcy for a whole host of different reasons, most of which are beyond their control.

The country currently finds itself staring a recession in the face because of an unforeseen global pandemic called the coronavirus, or COVID-19. Most people who suffer financially because of this virus do so because of bad luck, not necessarily because of poor planning.

Below, we’ll go over some of the reasons people file for bankruptcy and how bankruptcy can sometimes be a good thing — if it’s right for you and your family.

Unforeseen life events can cause bankruptcy

If you can afford to pay off debt and file for bankruptcy instead, perhaps you’ve made a poor decision. Similarly, someone filing for bankruptcy with bad intentions or to defraud creditors is behaving poorly and cheating the system.

In a case like this, the peanut gallery would be correct: This type of bankruptcy is bad. But what about the family forced into bankruptcy after the breadwinner loses a job? What about the family who incurs enormous medical bills based on an unforeseen car accident? What about the ex-wife in a community property state who is left holding the bag on thousands of dollars of credit card bills charged by her ex-husband without her knowledge?

In these cases, bankruptcy can provide tremendous relief and an opportunity to start over. It’s easy for someone who hasn’t experienced hardship to say that bankruptcy is bad, but talk is cheap and people have families to take care of.

Why the bad reputation?

Filing for bankruptcy has a bad reputation in many circles due to the fact that it damages your credit and involves discharging debts that will likely never be repaid. Sure, Chapter 7 bankruptcy isn’t great for your credit score and will appear as a public record for 10 years after filing. However, most consumers who file for bankruptcy have already had their credit damaged by a series of late payments.

Whether your bankruptcy filing can be labeled as “bad” is really a function of whether you intend to defraud the system or whether you have a moral obligation to pay debts that you plan to discharge in bankruptcy. There are many types of debts that are eliminated by filing for bankruptcy. For example, perhaps your primary debts are a $50,000 credit card balance and a $10,000 personal loan that you owe to your brother that he loaned to you while he was having financial problems of his own. If you file for bankruptcy, both the credit card debt as well as the debt to your brother will be eliminated. Filing bankruptcy to discharge credit card debt at 29% interest would not be considered “bad” by most people.

On the other hand, some would argue that discharging a $10,000 debt to your brother might not be the right thing to do. Even if you fall into this camp, it is important to understand that there is nothing that prevents you from voluntarily paying back the debt after filing for bankruptcy. You could file bankruptcy, discharge your credit card debt and then once you have an opportunity to rebuild, write your brother a check for what you owe. This does not in any way violate the bankruptcy laws. For this reason, whether bankruptcy can be construed as bad is really a function of context.

When is bankruptcy a good idea? The answer depends on your situation

Bankruptcy is not inherently bad or good, but it is an important protection for honest consumers who find themselves in big trouble with debt. A small minority of filers try to abuse the bankruptcy process to hide assets and cheat creditors. These stories are dwarfed by the stories of honest people who have suffered through tough times and finally turned to bankruptcy because they can’t see a way out. Even the Bible calls for debt forgiveness every 8 years.

The post Is Filing Bankruptcy Bad? Can It Be Good? first appeared on Michigan Bankruptcy Facts 734-722-2999.

The post Is Filing Bankruptcy Bad? Can It Be Good? appeared first on Michigan Bankruptcy Facts 734-722-2999.

Further,  medical insurance may prove insufficient or will not cover long term medications. Life has become such that one needs to think about and plan for any eventuality.

Experts recommend the following:

1.    Ask your doctor for samples of medication.

2.    Often an older drug is effective and cheaper. Request the doctor to write a prescription for a drug that is more affordable. According to studies you can save up to 75% this way.

3.    Find out the generic name of the medication and choose to purchase it instead of branded medication —the saving can amount to as much as 70%.

4.    Very often companies sell higher dosages of medication for a marginally higher cost. Be prudent, buy the higher dosage and split the medication in
half, one-third, or quarters. The savings you can make are almost 50 %.

5.    Order 90-day supplies in bulk from discount mail order pharmacies or online services. The savings are considerable and many doctors help long term patients reduce costs by putting the patients in touch with distributors.

6.    If a particular medication is very expensive ask the doctor to recommend a substitute. This is known as therapeutic substitution.

7.    Do try comparison shopping. You will find that the same medication is priced differently in local pharmacies, online outlets, and chain stores. Online pharmacies like http://www.walgreens.com/, www.costco.com , or http://www.drugstore.com/ offer medications at affordable prices.

8.    There are several patient-assistance programs that offer free or discounted medication to those who cannot afford long term illness. Companies like Merck have programs that benefit uninsured patients. Medicines are given at discounts of 10-40%.

9.    If you or a family member travels frequently  you could buy your medicines abroad. Often the same medicine manufactured by the same company is much cheaper overseas. One can also order medicine by mail from Canada where medicines cost 30-50% less than the US. But do check the laws before you attempt this.

10.    Start a health saving account where you can save pre tax dollars towards unforeseen medical expenses. This has a high deductible. Find out if you or other family members are eligible.

Use an insurance broker who always thinks of you. He must keep you updated on all new developments as far as health schemes are concerned and make sure you reap all the benefits of the insurance scheme. You could also consider a critical illness policy in addition to a regular health insurance.

The post 10 ways to protect your self from bankruptcy caused by prolonged illness. first appeared on Michigan Bankruptcy Facts 734-722-2999.

The post 10 ways to protect your self from bankruptcy caused by prolonged illness. appeared first on Michigan Bankruptcy Facts 734-722-2999.

Bankruptcy is one of the most harmful things you can do to your credit score. After all, it sticks around on your credit report for seven or ten years, depending on the type of bankruptcy you file.

But if you get into a sticky financial situation, sometimes bankruptcy is the right option. For instance, let’s say you have a ton of medical debt that you have no way to pay. In this case, filing for bankruptcy can help you resolve the situation sooner. Rather than continuing to make late payments as you struggle for years, you can make your debt more manageable now.

In essence, when you file for bankruptcy, you’re taking a credit score hit now so that you can ultimately save your credit score and finances in the long run.

The beauty of credit is that nothing is forever. Your credit score is meant to show potential lenders how you manage credit at any given time. Even if you’ve managed it poorly in the past, that may not always be the case. With some time and hard work, you can recover even from bankruptcy.

But where do you begin when it’s time to rebuild your credit score after bankruptcy? Here are the steps to take.

Step 1: Budget for Your Remaining Debts

Bankruptcy probably wiped out most of your debts, but maybe not all of them. And depending on the outcome of your bankruptcy, you may still have to pay several minimum debt payments. And of course you may incur additional debt after bankruptcy.

So your first step is to get into a position where you know, without a doubt, that you can make all of those payments every month.

The goal here is to never miss a minimum payment–or even make one late–ever again. This starts with having a solid budget.

During the bankruptcy filing, the courts should account for your current income and necessary expenses. So you should no longer be in over your head with debt payments. But it’s easy to get back in over your head if you aren’t careful. So make sure you take the following steps, starting today:

• Stop using debt. Your old credit card accounts are probably closed. But if you happen to have any still open, close them down now. We’ll talk in future steps about using debt responsibly. But to start, don’t use debt at all while you’re getting resettled.
• Keep track of your spending. Start using a tool like Mint or YNAB to track your spending. Be sure you stay within reasonable limits so you can always make your minimum payments on time.
• Build up an emergency fund. Having some money in savings can help you weather future emergencies without going back into debt. Start putting money into a savings account to be used only for emergencies. It’ll make following the next credit-building steps easier.

Once you’ve stuck to your budget for a few months, then start taking the following steps to actively rebuild your credit score.

Step 2: Check Your Credit Report

Sometimes during bankruptcy filings, things don’t get reported to credit reporting bureaus as they should. So now is a good time to check your credit report.

One common mistake after bankruptcy is that negotiated accounts aren’t reported properly. This means your accounts can continue to show as delinquent. This can cause your credit score to drop even more. So make sure that every account that was negotiated as part of your bankruptcy shows up properly.

Getting your credit report is simple. You can get one report per year from each of the three credit reporting bureaus from www.annualcreditreport.com. You’ll want to pull a report from each of the three bureaus–Experian, Equifax, and Transunion. Sometimes the information that appears on one won’t appear on the others. So check all three to make sure they are accurate, we suggest www.CreditKarma.com

A word of warning. The information in your credit report won’t be updated until your bankruptcy has been completed. Once it’s complete, give the bureaus a month or two to catch up. Then you can pull your free reports to ensure everything has been updated accurately.

You can also keep track of your credit score in a myriad of ways. As you focus heavily on rebuilding your score, you might sign up for a monthly credit report service. Or check out free credit score estimate services like Quizzle and Credit Karma.

These services give you access to your numerical credit score. Plus, they offer historical score information. This can be helpful so that you can watch as your efforts increase your credit score.

What if you notice inaccuracies on your credit report? Your first step is to call the lenders who are inaccurately reporting information. Get a step-by-step guide to correcting mistakes on your credit report here.

Step 3: Get a Secured Credit Card

You might be surprised at this step. After all, didn’t we just say that step one was to stop using credit? That’s true. But it’s also true that responsible credit use is the quickest way to rebuild your credit score. So you have to start somewhere.

The key here is the word “responsible.” You should only take this step after you have your spending well in control. You’ll get this credit card, but you’ll only use it for certain expenses. And you need to be able to pay it off in full every single month.

Once you think you can handle this, apply for a secured credit card. These cards require you to put down a deposit. If you deposit $200, you’ll typically get a $200 line of credit. Then if you don’t make your payment on time, the credit card issuer will take money from your deposit to cover the payment.

The best secured credit cards report your usage to all three credit bureaus. And some will even automatically convert to an unsecured credit card after a certain amount of time. When you’re shopping for a secured credit card, be selective. Here’s what you should look for:

• Reporting to credit bureaus. This is the absolute most important quality. If the secured card company doesn’t report to all three credit bureaus, it won’t help you rebuild your credit. So it’s not worth your time.
• Allows for increased credit limit. You might start out with a very low credit limit. Look for a card that allows you to increase your credit limit with responsible use. A higher credit limit will positively impact your credit score.
• Converts to an unsecured credit card. Ultimately, you want to get your credit score to a place that you can get unsecured credit again. Some prepaid cards will start checking your credit monthly (which doesn’t harm your credit). Once you get to the right score, they’ll automatically move you over to an unsecured credit card.
• Refunds your deposit. Once you’re done using the secured credit card, you should get your remaining deposit back. This is typical, but check the fine print to ensure that it’s true of the card you choose.
• Has no annual fee. Plenty of secured credit cards these days have no annual fee. If possible, look for a card that won’t cost you anything beyond your deposit to use.
• Allows for rewards. This isn’t an essential. You’re focused on rebuilding your credit score, not getting rewards. But some of today’s secured cards do offer points and cash-back rewards. This can be a nice perk if the card also meets these other requirements.

Once you qualify for a secured credit card, start using it. But be sure you can pay it off immediately every month. The best option is to use it only for expenses that are part of your regular budget. For instance, you could use the card for gas and only gas. Then pay it off as soon as the bill comes each month.

Over time, you can add more money to your secured card’s deposit account. This will increase your credit limit. As long as you keep your balance at $0, this can be very good for your credit score. You can learn more about how your balance-to-limit ratio affects your credit score here.

Step 4: Apply for an Installment Loan

This step is included on an as-needed basis. It’s the next-to-last step because it’ll be the toughest. It will take you time to qualify for an installment loan. And you shouldn’t borrow much just to increase your credit score. But you can build your credit score by diversifying your credit portfolio and making more on-time payments each month.

If you’re in a tight spot with your credit, don’t take out an unsecured personal loan for something unnecessary. You’ll pay interest through the nose! But if you, for instance, really do need a new car and can’t afford to pay cash, this can be a good place to start. Even a low-balance car loan will likely charge high interest if you’re recently been through a bankruptcy. So be sure the payments are manageable. And consider paying off the loan early so you don’t have to pay all that interest. Even making the payments over a year or eighteen months can help boost your credit score.

Step 5: Give it Time

Ultimately, your credit score won’t be perfect again until the bankruptcy record falls off of your report after either seven or ten years from the date of filing. However, according to FICO, the older your bankruptcy is, the less impact it has on your score.

This means that even three or five years out from a filing, your score can be significantly better than it is right now. If you were a financial mess pre-bankruptcy, you might even be in a better place than you were before you filed bankruptcy.

Just be sure that you continue to take these steps–especially using credit responsibly, maintaining $0 balances, and making payments on time. As you take these steps, your financial responsibility will shine through. And, eventually, you’ll live down that bankruptcy and be on your way to an excellent credit score.

The post 5 Easy Steps to Rebuild Your Credit after Bankruptcy in Michigan. first appeared on Michigan Bankruptcy Facts 734-722-2999.

The post 5 Easy Steps to Rebuild Your Credit after Bankruptcy in Michigan. appeared first on Michigan Bankruptcy Facts 734-722-2999.

In recent years, that growth has accelerated to the point that in 2003, medical costs made up more than 15% of the U.S. Gross Domestic Product (GDP). If we continue as expected, that percentage could grow to approximately 33% by 2040.

Medical Bills Are Often a Key Cause of Bankruptcy

People who’ve experienced an illness or injury and found themselves buried in bills (even if they have health insurance) may consider >filing bankruptcy as a way to get out of debt.

There are two main types of personal bankruptcy: Chapter 7 bankruptcy (debt discharge) and Chapter 13 bankruptcy (debt repayment plan).

Chapter 7 bankruptcy involves the debt discharge, which eliminates unsecured debts, which are debts not tied to property, such as medical bills, credit cards, utility bills and some personal loans.

A Chapter 13 bankruptcy filing is a little different, because it involves setting up the filer on an interest-free debt repayment plan. This is generally best for people who have unsecured debt and secured debt, which is debt tied to property, such as a mortgage, that they want to keep. Chapter 13 bankruptcy has helped millions stop foreclosure, repay their debts and stay in their homes.

When you or a loved one is injured or ill, what’s important is focusing on getting better–not worrying about excessive medical bills.

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