Recently on our bankruptcy forum a user asked, “My spouse and I are having an argument. We currently owe $25,000 in credit card debt, $50,000 in medical bills, a $300,000 mortgage we cannot afford, and a $50,000 car loan we cannot pay. He seems to think that if we file for bankruptcy that all of our debts and problems will disappear. I feel like we got ourselves into this mess and we should get ourselves out. What is your advice?”
Given the increased cost in medical care and the new push for businesses to cut worker’s hours so they do not have to pay for medical insurance there are millions of U.S. citizens who have medical bills they cannot pay. Recently on our legal forum a user asked, “If I file Chapter 7 bankruptcy will I have to repay my medical bills?”
If you have unpaid medical bills you can expect your credit score to be lowered. In fact, according to experts, medical debt is the most common type of collection account, representing nearly half of all reported collections. The Federal Reserve notes that “almost one in six credit reports contain a medical debt collection” and “two in five Americans reported a lower credit rating last year due to unpaid medical bills.”
There seems to be some confusion about when you can file a Chapter 7 once you have already filed, especially after the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Can you file a Chapter 7 bankruptcy now if you filed before the 2005 law?
A blogger recently posting on a bankruptcy forum website posed this question while giving his personal bankruptcy story. The blogger wrote, “I was wondering. I Filed Chapter 7 on 07/18/2005 and, it was discharged on 11/15/2005. I was in a car crash and now owe more then $75,000 in medical bills. Can I file bankruptcy again in 2012 or do I have to wait until 2013? I am a little lost here. I have the the paper and credit reports ready to go, but I have heard that you now have to wait 8 years. Does this apply to bankruptcy filed under the old bankruptcy?”
The direct answer to the blogger’s question is “no,” the new filing does not apply under the old bankruptcy law. The new bankruptcy filing will apply under the 2005 laws that went into effect October 17, 2005, not the old bankruptcy laws in effect prior to the changes.
That means this blogger has to wait exactly 8 years from his file date in order to file if he is expecting to get a discharge for his medical bills. This is true because he now comes under the new regulation. That means he can file another Chapter 7 bankruptcy as early as 7/18/2013 before he can expect a discharge.
Expectation of getting a discharge is critical in understanding this time line. There is no limit on the number of bankruptcy cases that one may file. In fact, there is no limit in between time frames to file bankruptcy. Nevertheless, if sufficient time between filings does not take place, you may be not be eligible for a discharge.
As an example, if a debtor has assets with enough equity to satisfy his creditors, he may file a Chapter 7 bankruptcy in order to get a trustee to liquidate the asset or assets and pay off his creditors. He will not be expecting a discharge of his debts, but instead, he will be expecting the liquidation of his assets to satisfy his debts.
The advantage of the debtor filing a bankruptcy without being eligible for discharge is that the automatic stay will go into effect and prevent creditor action in collections. The automatic stay can stop lawsuits and any other creditor action, giving the debtor enough time to settle the debts with the sell of the assets.
To take advantage of this last scenario in filing a bankruptcy without the possibility of a discharge has some inherent risks. If you cannot satisfy your debts when the trustee liquidates the assets, you will still be responsible for the debts not yet satisfied. Before you contemplate this type of action, it would be very wise to consult with an experienced bankruptcy attorney.
Food, fuel, formulas for the future
April 24, 2011
By Mike Hinshaw
Most people considering bankruptcy don’t want to file for such strong protection–even if doing so is in their best interests from a business standpoint.
Bankruptcy fraud is no answer
Of course, there are always those who scoff at the law and try to game the system. Regular readers here are familiar with our coverage of bankruptcy fraud–and the attendant penalties when the rogues get caught.
Never forget, the bankruptcy code is administered by federal law.
Accordingly, cheats can wind up in prison.
Where’s the jobs?
Of course, most people want to play by the rules. And they want address their own specific situations. Bankruptcy protection addresses overwhelming medical bills. And loss of a job–or even an entire industry.
Just think of how many jobs have been lost to overseas outsourcing.
With that in mind, it’s easy to see why hard-pressed individuals would want to keep up with news of the economy. Really? Is this so-called “recovery” from the Great Recession for real? Can I count on it?
Can I hope to get a job similar to the one I lost?
Is it realistic to even hope for job in the same sector?
Thinking along those lines, I ran across a story about underwear. Sounds zany, I know. Then again, Warren Buffet uses all sorts of indicators for his investing business, including the quantity of freight traffic on trains (which led to a major stock purchase of Burlington Northern, for a man who’s not likely to file for bankruptcy protection anytime soon).
Underwear sales linked to better economy?
At any rate, here’s the lede, from an April 21 piece at CNBC.com: “Shares of Hanesbrands, Warnaco, Limited and Maidenform are thriving, and two analysts see higher underwear sales as a sign the economy is recovering.”
Even during the 2008 downturn, “the underwear area was very strong,” Eric Beder, retail analyst at Brean Murray Carret, told CNBC Thursday.
“People still wanted to spend money. So they could spend money on underwear if they were feeling good about themselves, even though for most people they wouldn’t show that off.”
Michaell Yoshikami, YCMNET Advisors CEO, said many put off purchases for as long as possible and now want to replenish the underwear drawer.
“I think there is a cyclical recovery that you’re going to see and it does suggest that the economy is recovering (and) consumers are spending more money,” he said.
So,yeah, it sounds kinda’ silly. But maybe they’re onto something: As crazy as this sounds to admit, I could use some new underwear–and socks, too.
But the way I’ve been pinching pennies, I guess I sort of felt like it’s extravagant to buy new stuff when my current stuff is still OK to use.
New home sales off the mark–way off
This next piece puts things in a more concrete perspective.
Who’s buying new homes these days?
Apparently, not very many–from an April 22 piece in the New York Times:
RICHMOND, Ill. — In this distant Chicago suburb, a builder has finally found a way to persuade people to buy a new house: he throws in a car.
Kim Meier’s spring promotion, which includes a $17,000 credit at a nearby General Motors dealer, has produced seven sales since the beginning of March, a veritable windfall of business for a builder who sold only 20 houses last year. “We needed to do something dramatic,” said Mr. Meier. “The market’s been soft.”
That is one way of putting it. The recession hurt a lot of industries, but it knocked the residential construction market to the mat and has kept it there, even as the broader economy has started to fitfully recover.
A shift in home-buying patterns?
According to the article, home-buying behavior may be undergoing a dramatic shift. What some critics (including myself) of “village developments” have long derided as “McMansions” are the tax-intensive, pocket communities–often gated–that home buyers seemed to crave with undisguised lust. More house, more custom roof cuts, more ambiance of the near-wealthy.
What seems to be coming into vogue now, against $4 gasoline and pivot-point grocery prices, are smaller places, easier-to-maintain homes, homes that are closer to work.
Says the NY Times: “That often means buying a home out of foreclosure from a bank.”
Gasoline & groceries: costs squeeze many a consumer
Now, this April 21 article from CNBC.com is pretty strong reinforcement for the Times’ take:
The combination of rising gasoline prices and the steepest increase in the cost of food in a generation is threatening to push the US economy into a recession, according to Craig Johnson, president of Customer Growth Partners.
Johnson looks at the percentage of income consumers are spending on gasoline and food as a way of gauging how consumers will fare when energy prices spike.
With gas prices now standing at about $3.90 a gallon, energy costs have now passed 6 percent of spending—a level that Johnson says is a “tipping point” for consumers.
“Energy is not quite as essential as food and water, but is a necessity in today’s economy, and when gasoline costs more than bottled water—like now—then it takes a huge bite out of disposable spending,” he said, in a research note.
And that’s how we come full-circle. When you seriously need bankruptcy protection, every penny counts and every angle must be measured. A trained, experienced bankruptcy attorney can help you do that.
Whatever you do, before making major, life-changing financial decisions, consider consulting a trained, experience attorney. If you think your home is a candidate for a short sale, be sure to ask your attorney about it–it could greatly affect your standing and strategy for starting over.
For bankruptcy basics, please see:
If onion prices didn’t make you cry, your medical bills just might. Medical costs continue to rise and is scorching the middle class and the poor alike. The situation is probably not going to get better any time soon, and medical bills can sometimes be overwhelming.
This personal bankruptcy story was posted on the internet in March of 2011 as comments in a bankruptcy discussion: “My husband was laid off his full time position last Friday 3/11/11. We sold our single family home in 2007 in an effort to downsize or we would have been foreclosed on…it has left us with NO back up in case of emergencies like if our only car breaks down. Last year my husband was hit from behind at a stoplight and had a back injury that has required physical therapy, Neurologist visits and several non-surgical procedures just to get him out of pain. Even so, our health insurance through my husband’s job did not cover everything after the auto insurance maxed out, and we are once again finding ourselves in a lot of debt. We only have one car now…I have a part time job that hardly pays anything and they don’t give me enough hours. Still, after all this we basically live paycheck to paycheck, have no savings and nothing to show for our hard work over the yrs. I would be okay working a day job – but now I have no car and have not had any luck finding a job anyway. I have a B/A degree. I am at the end of my rope with all these financial issues. We were just making ends meet as it was. AND you still have to consider – your basic living expenses, supporting our children etc. The medical debtors are ringing the phone off the hook and even though I was going to try to make payment arrangements with all of them – I don’t see how this will work if my husband is out of work. We will be lucky if we can pay our rent, basic utilities and food/general expenses. So having told you all that – what should we do with these medical debts that will effect our credit if we can’t pay them? Even $10 per month is a lot of money when you are out of work.”
The debtor in this personal bankruptcy illustration has found their medical bills overwhelming at a time they have lost part of their income. Already in financial chaos, the family really needs to consider looking into the possibility of filing for bankruptcy protection. The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. That means all creditors will have to go through a US Bankruptcy Court trustee in order to deal with their debtors.
There are two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13. A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A chapter 13 bankruptcy is the second bankruptcy available to individuals and is called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. If you have an income and qualify for a chapter 13, there are certain advantages for filing one. These advantages are: to save your home from foreclosure; to reschedule secured debts; to provide protection for co-debtors; to consolidate your loans under one plan; to keep non-exempt property; to extend certain tax obligations, student loans, or other such qualifying debts; and to qualify for bankruptcy relief. Filing a chapter 7 will not afford you these various opportunities listed.
Bankruptcy laws can be complicated, and common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan counties of Nassau or Suffolk, New York, contact us today at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.