What’s the best way to navigate personal bankruptcy?

A complicated, unplanned pregnancy is what pushed Carlazjion Constant of Smyrna, Tennessee, to the brink, financially.

Her pregnancy was at high risk, and Constant said her high-deductible health insurance hadn’t helped much with the extra doctor visits. Just as those bills totaling $ 5,000 fell due earlier this year, a real estate company began to garnish her salary for a lease broken ten years ago while she was in college.

“I have a child. Like, I can’t do that, ”Constant said. “I have to do something, something has to be done. There must be a way out. “

So she began to look into Chapter 7 bankruptcy, which is usually aimed at those who don’t have a lot of assets to protect. Unlike Chapter 13, it basically cancels out most of the debts, but usually not student loans.

Constant called bankruptcy lawyers and learned they would charge him at least $ 1,500. “To get out of debt, I’m getting into debt again. It was just wild for me, ”she said.

Carlazjion Constant, 31, of Smyrna, Tennessee, filed for Chapter 7 bankruptcy earlier this year after her paycheck began to be seized by a real estate company and she was about to pay $ 5,000 for his medical bills related to the birth of his son. (Blake Farmer / WPLN News)

Medical debts often push families to personal bankruptcy. According to the US census, nearly 20% of US households have to pay old medical bills, with higher concentrations in the south.

It’s a last resort, but that financial reset button is also out of reach for many because the act of declaring bankruptcy is relatively expensive.

A Brooklyn-based nonprofit, To resolve, try to help reduce these costs. Constant’s web search for a cheaper solution brought her to the Upsolve website, where users can download an app that helps them file for free and without hiring a lawyer.

“These legal fees are like modern day voting taxes,” said Upsolve co-founder and CEO Rohan Pavuluri. “I mean, if you can’t afford the fees, you can’t access this right that you’re supposed to be guaranteed. “

By answering questions in plain English through the app, the data fills out nearly two dozen forms required to file for bankruptcy in federal courts.

To offer the service for free, the nonprofit has government backing, as well as money from charitable foundations and some big investors and leaders in Silicon Valley.

Users still owe the court filing fee of $ 335, although the app also helps users claim the fee waiver. Since its inception in 2018, Upsolve says it has helped people file for bankruptcy for over $ 435 million in debt relief.

More than just simplifying the process, Pavuluri said his mission is to destigmatize bankruptcy. He said bankruptcy is seen as a personal moral failure, even though it is used strategically in the corporate world to make a fresh start.

“We want to give ordinary Americans the same tools as the richest people and richest businesses in America,” he said.

But bankruptcy isn’t for everyone, said Erin Akery, who provides free financial advice with United Way in Nashville. “This may not be great for people who are looking for a quick and easy fix, and it is not the right way for them.”

Chapter 7 bankruptcy devastates credit for years, making it difficult to get a loan for a car or rent an apartment. It’s also a lifeline that can only be used once every eight years – so if debt continues to pile up, that won’t be an option for some time.

And the cost, while sometimes prohibitive, can also help some people better consider tradeoffs. “I think if people don’t have to go through this cost-benefit analysis, then a lot more people could file for bankruptcy when they really shouldn’t,” Akery said.

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