Of those who file for bankruptcy in Illinois and throughout the country, roughly 66.5% do so because of medical bills. Individuals file either because of the medical debt itself or because of a lack of income caused by time spent out of work. This is according to a study that was published in the American Journal of Public Health. It found that the Affordable Care Act has done little to reduce the number of bankruptcies related to medical costs.
While there are several guidelines that must be met to file for Chapter 13 bankruptcy, there is no income limit to do so. However, an Illinois consumer seeking such protection will need to take a credit counseling course as part of the process. It will also be necessary to create a payment plan that is approved by the trustee, the bankruptcy judge, and the creditors involved in the case.
In September 2010, there were about 1.6 million bankruptcy petitions filed throughout the country. Eight years later, that number had gone down to over 770,000 cases. However, the number of bankruptcy cases was down in Illinois and across the U.S. for a variety of reasons that individuals may not have expected. One theory is that people have fewer assets to protect compared to several years ago. Therefore, they are less likely to file for protection from creditors.
Illinois residents who are struggling to pay their bills sometimes seek relief by pursuing debt forgiveness, but they often find the terms offered by credit card companies or debt collectors very difficult to meet. Lenders and collection agencies are primarily interested in recovering as much of the outstanding balance as possible, and any concessions they make are designed to provide either temporary relief only or secure the largest lump sum payment possible.
A recent study suggests that a worryingly high number of senior citizens in Illinois and around the country are struggling to cope with unmanageable financial situations, and spiraling medical debt is often to blame. Bankruptcy filings among Americans 75 years of age or older increased by 300 percent between 1991 and 2016 according to figures from the Consumer Bankruptcy Projects, and Chapter 7 or Chapter 13 petitions made by individuals between the ages of 65 and 74 more than doubled.
Illinois residents who file for personal bankruptcy may be able to obtain actual and punitive damages if they are harmed by the purposeful violation of the automatic stay that is set in place when bankruptcy is filed. However, there is a question whether the actual damages they receive should include damages for emotional distress.
Overwhelming debt can make life extremely difficult for many families in Illinois. Not surprisingly, one of the biggest contributors to insolvency is medical debt. Almost half of the respondents to a 2017 Federal Reserve survey noted that they had received at least one medical bill in the past year that they could not pay.
Illinois consumers who file for bankruptcy should understand the process before they do so, and this includes understanding certain myths about how it affects credit. For example, some people may have heard that having negative information on a credit report will bring down their score more compared to people who have no negative information on the credit report, but the lack or presence of either positive or negative information does not affect the severity of the hit a person's credit takes. However, the amount of debt and the number of accounts involved may.
Illinois residents and others across America have seen their annual credit card debt levels increase since 2015. That year, Americans accrued $43 billion in debt while that number rose to $87 billion and $92.2 billion in 2017. Overall, the Federal Reserve says Americans have more than $1 trillion in outstanding credit card debt. The $92.2 billion accrued in 2017 was the highest total seen since 2007, which was just before the Great Recession.
When it comes to personal finances, Illinois residents have something to be thankful for: They don't live in one of the top 10 states where residents have the most debt. California heads that list.