Medical Bills and Bankruptcy

When I speak with a potential new client, and I am trying to get a feel for their situation, one of the first questions I ask is, "how much credit card and medical debt do you have?" There is a good reason I ask this question, because these are the primary types of debt that weigh most of my clients down. Medical bills are only growing larger.

Medical bills can be downright astronomical, especially for individuals without health insurance. Many clients face five-figure medical burdens. I have had multiple clients with over $100,000 in medical debts. These is not much you can do about debts this large, unless your income is enormous. Bankruptcy must be a strong consideration in these cases. Medical bills do not spiral as quickly as credit cards, because there is normally no interest owed. However, the underlying debts are often far larger.

Not all medical debt burdens are this dramatic, but medical debt in the thousands or ten-of-thousands can be just as onerous when combined with credit card debt, mortgages, car payments, and student loans. The good news is that medical is almost always dischargeable in bankruptcy, whether it is made up of several small co-pays, or a huge six-figure bill. Eliminating them can be the main purpose of your bankruptcy.

Unfortunately, this is a problem that will only get worse, as Congress seems intent on limiting who can receive affordable health care, and how much it will cover. Uninsured debtors are always a sever injury or extended illness away from financial ruin. Bankruptcy will be the best, and most legitimate option for dealing with the huge bills that result. This is a problem worth watching in the coming years. I expect more and more people being forced to file over the next 3 or 4 years.

When I meet with individuals facing medical bills, I always make sure they gather up every bill they have in their possession. Medical debts are often not reported to credit agencies, and therefore do not show up on credit reports. Debts not disclosed are not discharged though bankruptcy, so it will be important to provide your attorney with every statement. Trying to decipher medical bills can be headache-inducing, as statements on the same service often show up in different forms, with different return addresses and account numbers. More is better... gather everything up and let your attorney review it. There is no need in missing a bill due to lack of thoroughness.

A final thing to consider with medical bills is whether you will have any upcoming or ongoing bills. If you file bankruptcy too early, these bills will not be discharged, as only debts accrued before bankruptcy can be discharged. Let your attorney know about your medical future so he or she can help you best determine when to file your case.

Medical bills will become a growing debt problem as Congress reduces and limits access to many working Americans. I have seen this in the past, and it is sure to reoccur as the number of uninsured Americans increases. Contact us if you are facing medical bills you can't pay to set up a free consultation and learn about your options.

You Can Keep Your Car In Bankruptcy... But Should You?

Bankruptcy affords numerous opportunities to keep your vehicle. This is important, because you need your car to get to work, pick up your kids, and in general get around a town that doesn't have great public transportation. However, just because you can keep your car in bankruptcy doesn't mean that you necessarily should.

Bankruptcy allows you to keep your vehicle as long as you can show that you can afford the payment. In Chapter 13 bankruptcy, you can even catch up on arrears owed and/or stop a repossession. The arrears can be made current over the three-to-five year repayment. So, in most cases, a car can be retained. However, there are situations when you should consider surrendering it through the bankruptcy.

The most common situation for surrender is when the arrears are too great to pay. If you qualify for a Chapter 7, and there are arrears on your vehicle, you would need to file a Chapter 13 bankruptcy to keep it. Chapter 13 bankruptcy is more expensive and time consuming that Chapter 7 bankruptcy, and it just might not be worth it. You can walk away from your obligation in Chapter 7, which may be an attractive option. When you walk away from a car in Chapter 7 bankruptcy, surrendering it to the creditor, your financial obligation is wiped away. You will not owe any deficiency.

An important point will be how much you owe versus what your car is worth. If you owe $20,000 and an additional $5,000 in arrears, but your car only has a Blue Book value of $15,000, it might not make sense to keep such a high payment for such a low-value car. If it is your only vehicle, and you absolutely need it to get to work, and there will be no other way to finance a vehicle in the future, you may need to bite the bullet and keep it. But, if you can use a spouse's or parent's vehicle, or take public transportation, bankruptcy might be a good opportunity to get away from the payment. It will depend on your particular circumstances.

I meet with many clients struggling with large car payments who, upon learning they can get away from the vehicle obligation, are happy to do so. Large car payment weigh my clients down. And cars only depreciate in value. It will not be very difficult to get financing on a more modest vehicle after filing your bankruptcy.

One situation where it probably makes sense to keep the car is when you must file a Chapter 13 bankruptcy that repays your unsecured creditors in full. In these cases, if you surrender a car, you will have to repay the deficiency on the car loan (unlike in a Chapter 7 bankruptcy). It doesn't make much sense to pay for a car you no longer possess, so keeping it is more likely your best option.

So what should you do? Contact us to set up a free consultation to discuss your automobile situation. I will be happy to sit down and review your case in detail. The monthly payment, your future prospects, and the condition of the vehicle should be considered. Your circumstances will probably dictate what you should do, but the decision will always be yours.

Why Are There No Creditors At The "Meeting of Creditors"?

The prospect of the Meeting of Creditors causes a lot of anxiety for many of my clients. While this is understandable (the process is new to them), it is unfounded. There is very little to worry about during the Meeting of Creditors as long as you are honest and prepared.

A major cause of anxiety is the belief that your creditors will be present, and will cross-examine and grill you. People picture a courtroom setting with a judge and prosecuting attorney. Given the aggressiveness of collection agencies that have hounded them for months and sometimes years, debtors understandably believe a similar attorney will appear in an attempt to intimidate and belittle them. In reality, nothing could be further from the truth.

First of all, there is no judge and no courtroom. The Meeting of Creditors is conducted in a normal office room, in front of a "trustee", who is an attorney appointed to review the case. While there are bankruptcy judges and courtrooms, these only become necessary in complicated and disputed cases. The Meeting of Creditors is a much less formal affair. The trustee sits in the place of the creditors who are owed money, reviews the filing, and asks the debtor some simple questions. Your attorney will be at your side to assist you.

And this brings me to the point of there being no creditors at the Meeting of Creditors. As crazy as it sounds, there is normally no reason for them to show up. First of all, they would need to either hire and attorney or in-house council to appear, which is costly and time consuming. Given the fact that they have little hope of recovering any money in a Chapter 7 bankruptcy, this would be a waste of money for most creditors.

Second, the trustee acts in their place. If the debtor appears to have assets or income sufficient to pay their creditors, the trustee will take action. The trustee will object to the bankruptcy filing if there is anything improper about it. The trustee receives a cut of the recovery, and would thus be motivated to act on their behalf if something is available. With little in the way of rights, and very little chance of recovery, and the trustee sitting in their place, it is extremely rare when a creditor shows up. 

There is also little reason for the creditors to show up in Chapter 13 cases. Once again, there is a trustee sitting in their place. Also, the amount of money there are to be repaid is determined by the claim they file, not by a personal appearance.

The only situation when creditors may (rarely) appear is when they are "unsophisticated creditors". This means they are not a credit card or finance company. An example would be someone included on a personal loan, or an ex-landlord. These individuals know very little about the process, and when they receive a notice saying their rights may be affected, they will sometimes show up. Even then, not knowing anything about the process, they normally have very little to add.

The prospect of the Meeting of Creditors is daunting to many bankruptcy filers, but it should not be! The process is very straightforward, you will be very well prepared by my office, and most importantly, you creditors will likely not be at the meeting of their very name!

Contact us if you have any questions about the Meeting of Creditors in particular, or the bankruptcy process in general.

Spring and the Bankruptcy Fresh Start

Spring is a time for new beginnings and fresh starts. It's not a coincidence that many people undertake "spring cleaning" this time of year. After months closed windows, congestion, and clutter, the first appearances of Robins and warm breezes have everyone clamoring to clear things out, get some fresh air in the house, and get ready for summer.

The desire to do the same with personal finances is no different. Bills and expenses pile up just the same as household clutter. And spring is as good a time to clear up your finances as any other. With summer on the way, now is the time to consider some of the financial clutter that can we wiped away...

• Credit cards: Credit card debt piles up faster than any other type of debt, due mostly to the fact that the interest rates are astronomical. If you are making minimum payments, it is likely you are not reducing the balance of your debts at all. This not only clutters up your credit report, it permanently weighs down your credit score. High outstanding balances and debt ratios will keep your credit score stalled in the 400s and 500s. Bankruptcy is a way to clear these out and reset your debt-ratio balance. Your credit score will go up quickly. If your earnings are higher, Chapter 13 bankruptcy is an option for repaying your credit cards without the interest.
• Old car repo's: Car repossessions and returned vehicles will show up on your credit report and damage your credit history. They can also lead to lawsuits and judgments when the balance owed after auction is a large amount. If you are looking to get a new vehicle this summer, you'll want to account for your old vehicle this spring. These balances and lawsuits are considered "unsecured" and can be wiped out.
• Deficiencies on your mortgage. Have you been falling behind on your mortgage due to temporary unemployment or disability? You can catch up in  a Chapter 13 bankruptcy. The terms are flexible, and a plan can almost always be made to accommodate your debt. The mortgage arrears can be paid without interest, and filing immediately stops any foreclosure actions. Get back on track before it is too late.
• Medical bills: Old medical bills from a serious illness or period without insurance coverage weighing you down? Bankruptcy is a great way to discharge your obligation. One major illness without insurance can lead to six-digit medical bill totals. This would be impossible for most people to ever pay off. Bankruptcy can help.
• Utilities: Is a utility threatening you with a shut-off notice? Now is the time to act. As long as you file before the shut-off, service can be maintained and secured. Once again, don't wait until it is too late.

The idea of a fresh start is built right into the bankruptcy code. There are exemptions to protect your property and income, an automatic stay to protect you from lawsuits, and other features to make sure that bankruptcy gets you back on your feet... and doesn't destroy you. These is no reason to let old debts ruin your life, and the quality of life for your family. Take advantage of this fresh start this spring, don't let your 2017 be ruined by old worries and stresses. Contact us if you would like to discuss your own fresh start!

Updated Median Income Amounts For Western Pennsylvania

The United States Trustee has published new Census Median Income tables, effective Saturday, April 1st, 2017. These tables are used to determine whether or not a bankruptcy filer, based on household size and gross income, must file a Chapter 13 repayment. If the household income is above these thresholds, you will need to complete the second portion of the means test.

1. Household of one: $51,138
2. Household of two: $61,271
3. Household of three: $75,018
4. Household of four: $90,821
5. Household of five: $99,221
6. Household of six: $107,621
7. Household of seven: $116,021
8. Household of eight: $124,421

A couple of points of clarification. First, these amounts are for annualized gross income. But, the means test is a 6 month look-back. This can be a bit confusing. If you are the lone household earner, you will be above the threshold if you earn $25,569.00, or one-half of the annualized threshold amount listed above, in the 6 months before filing. The table is calibrated to yearly earnings, but the means test only looks at the 6 months before filing (this consistently causes confusion).

Second, these amounts are for gross earnings, that is, earnings before taxes. The amount you paid in taxes for the 6 months before filing only applies for the second part of the means test, which may reduce the amount you must repay. However, the initial determination is based on gross income.

Third, household size is generally determined by how many dependents you claim on your taxes. There are exceptions to this rule, but it is the basis in most cases. Adult children normally do not count.

Finally, it should be noted that ALL sources of income, outside of Social Security benefits, are used to calculate this income. This includes bonuses, unemployment, lottery winnings, side jobs, and business income. Make sure you report all types of income to your attorney.

If you have any questions about how the means test works, or would like to schedule a free consultation to calculate your earnings, contact us. Make sure to have 6 months of pay stubs and proof of income. I will be happy to walk you through the process.