Is Bankruptcy an Option if My Debt Includes Medical Bills?

The simple answer to this questions is, “Yes, you can declare bankruptcy if medical bills have caused you financial hardship.” As a matter of fact, many people have few financial issues until a medical emergency strikes.  The medical bills are what trigger their need for bankruptcy. 

If you have medical bills AND credit card debt, you include both in your bankruptcy filing.  You do not have the option to pick and choose which debts are included in your bankruptcy. All of the debts that fall under a similar classification will be included in the bankruptcy.  This means if you have credit card debt and you were able to keep up with the monthly payments (the cards are not behind or in default), but you are struggling with medical bills, it will still all be included in the bankruptcy.

The goal of bankruptcy is to help you get a handle on your finances, while also helping your creditors receive the money they are due.  In many cases, creditors receive just a portion of the total amount owed, but they must be treated fairly across the board.  One creditor cannot receive a better payment arrangement than another when it comes to a debtor’s bankruptcy.  No creditor, including any debts you have to friends and family, can receive what in bankruptcy code is known as “preference.”

Medical bills and credit card debt, as well as some tax debts and personal loans, are “general unsecured debts.” This means that under bankruptcy law, they must all be treated in the same manner.  In the end, when you file for bankruptcy, all of these general unsecured debts must be included in your bankruptcy.

Bankruptcy can be a very effective tool for helping those with medical debt.  An experienced bankruptcy expert can help you evaluate your specific circumstances.

If my husband/wife files for bankruptcy, will I have to file too?

Common Questions About Bankruptcy

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Bankruptcy is the last option for some people and many have questions about what will happen to them.  Here are some of the most common questions we hear:

Will I lose my home/car?

That is a question that has to be answered individually.  Florida has some of the most lenient exemptions laws when it comes to your home.  In a Chapter 13 Bankruptcy you can even wipe out a second mortgage or home equity loan.  When it comes to your vehicle, you can also exempt $1, 000 of equity in your car.  You may also choose not to include your car in your bankruptcy and continue making the payments on your own.  There are exceptions and the answer also depends on whether you file a Chapter 7 or a Chapter 13. 

How long does it take to file bankruptcy and wipe out my debts?

The length of time it takes to file largely depends on you.  If you come to us on a Monday, in some cases we can file by Friday.  You may want to talk to us and think it over before filing.  Some clients wait a long period of time before actually filing a bankruptcy.  This can hurt you in the long run because interest and fees are accruing on your debts.  As to the time it takes to wipe out your debts, if you file a Chapter 7 bankruptcy, it usually takes three months for the debts to disappear.  Chapter 13 is a repayment plan that takes three to five years on average. 

I am embarrassed by my financial situation.  Will my neighbors/friends/coworkers find out I have filed bankruptcy?

Bankruptcy records are public and anyone can go online or down to the federal courthouse and see if you have filed for bankruptcy.  Unless you are a celebrity or applying for a high profile job that requires a credit check, it is unlikely if anyone will know if you filed bankruptcy unless you tell them.  However, some publications do run bankruptcy filings and someone may recognize your name.

Can my creditors still call me after I have filed bankruptcy?

NO! Once you have filed for bankruptcy protection, they must stop all collection proceedings until the case is settled.

Every situation is different and the only way to get an answer that will ease your mind is to talk to us about your situation.  We have helped hundreds of clients protect their assets and financial future. 

You Can Get Relief From Your Second Mortgage

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Homes need maintenance and often homeowners don’t have the money to do expensive upgrades like adding a new cooling system or fixing a leaky roof.  Home maintenance can be costly and taxing.  You have to hire a contractor, check on permits and then live through the hassle of living in a home that is under repair.  Many will be forced to take out a second mortgage or get a home equity line of credit to meet their financial needs. 

Sadly, some homeowners not only face a home that needs repairs (and the headaches that go with it) but they also owe more on the home than it is worth.  Loan modifications may be out of the homeowner’s reach due to their credit problems.  Short sales can take months and leave the homeowner searching for a new place to live.  Many homeowners don’t want to leave and invest in the repairs in anticipation of living in their homes for the rest of their lives.  But circumstances such as a lost job, health crisis, divorce or other crisis may have impacted their ability to pay their bills. 

A faster option than a short sale or lengthy bank negotiation for a loan modification is available to homeowners that may seem like a miracle.  A homeowner can get out of the second mortgage or home equity line of credit and still keep their home.  It’s called “stripping the lien” and it’s one of the benefits of a Chapter 13 Bankruptcy that may be possible for your situation. 

Here’s how it works: Once you file a Chapter 13 Bankruptcy, the trustee overseeing the plan can eliminate the second mortgage or home equity line of credit if your home is worth less than your first mortgage.  But that’s not the only benefit.  If you are behind on your first mortgage, the bankruptcy trustee can give you up to 60 months to catch up on your payments—without paying any interest!  Here’s another benefit—this can also apply to third mortgages.  However, it does not apply to first mortgages.

In addition, a Chapter 13 Bankruptcy can eliminate other debts you may owe such as credit cards.  This will give you additional money to help catch up your mortgage payments.

You don’t have to lose your home because of a crisis or credit problems.  Our firm has helped hundreds of clients work through their financial challenges and keep their home with options that are right for them.

What are priority debts and how are they treated in bankruptcy?

Different Types of Debt and How They’re Treated in Bankruptcy

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Many people have questions regarding how their debts will be handled after filing for bankruptcy and the answer depends on the type of debt that is owed.  Most debt falls under the following categories:  secured debt, general unsecured debts and priority debts.  Each will be handled slightly differently in your bankruptcy. 

Secured Debts

A secured debt is a debt that is secured by collateral.  These types of debts include car loans, mortgages or any other debt when there is property that can be repossessed or taken if the debt isn’t paid.  In most cases, if you want to keep a secured debt, you can do so while still wiping out your other debt. Converselly, if you are ready to walk away from your house or car, you can do that as well.When a secured debt is handled in bankruptcy, the trustee will consider the debt’s collateral versus how much is owed.  Also, some debts can be partially secured and partially unsecured, such as when you owe more on a home or vehicle than it is worth. 

General Unsecured Debts

Any debt that is not secured by collateral is known as an unsecured debt.  Most credit cards, personal loans, payday loans and medical bills fall into this category. 

Priority Debts

Priority debts are debts that receive priority because the law treats them as being more important than unsecured debts.  These debts usually include child and spousal support; the administrative costs of the bankruptcy case, including trustee fees and attorney fees; wages and other forms of compensation owed to employees if it is a business filing for bankruptcy; certain income taxes, and some other kinds of taxes.

How Each Category Of Debt Is Handled In A Bankruptcy

In a Chapter 7 bankruptcy, if assets are liquidated, the debts that are considered high priority are paid first; in many cases, the unsecured debts aren’t paid at all, or are only paid partially. 

In a Chapter 13 bankruptcy, the repayment plan created by your trustee will have all priority debts paid before the case is completed.  

What the Myth of Sisyphus Can Teach You About When It’s Time to File Bankruptcy

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How do you know if you are in over your head and the time has come to seriously consider bankruptcy? 

Consider this story:  In ancient Greek myth, there is a story of Sisyphus, who was a king condemned by the gods to roll a rock to the top of a mountain as an endless, repetitive task.  At the point in which the rock finally reached the peak, it would then roll back down to the ground, forcing the king to begin the monumental task of rolling it back up the mountain. 

Are you like Sisyphus when it comes to your finances?  Do you find that regardless of how much effort you put into trying to dig out of debt, the weight of it takes you right back where you started?  If so, then it’s time to seriously consider bankruptcy as a way to finally conquer your financial goals and put you on better footing.  No one should live paycheck to paycheck and it is a system that is unsustainable.  The first week that you miss a paycheck due to illness or job loss, you’re up the proverbial creek without a paddle.  That’s certainly no way to live! 

Read below and see if any of the following situations apply to you.  If one or more apply, bankruptcy is most likely your best option:

1. I spend more than 20% of my income on bills.
2. I have to use my savings sometimes to pay my monthly bills.
3. I often use my credit cards to pay for necessities because I don’t have the cash on hand.
4. I have more than four major credit cards that I use regularly.
5. I often have to call on friends/family to bail me out of financial distress. 
6. I have had to finance my car for six or more years just to make sure the payments were low enough for me to afford.
7. Whenever I apply for credit, I usually need a co-signer. 

If any of these sounds like you, give us a call for a free consultation.  305-663-3281

What is the first step in determining whether or not bankruptcy is my best option for dealing with debt?

Will I Be Able to Rent a House or Apartment if I File for Bankruptcy?

In today’s current economic climate, many people are forced to rent due to losing their homes in foreclosure and not having the credit or means to buy another house.  This means that rental property is really the only option for many households and landlords understand that.  People with perfect credit are more likely to be taking advantage of the great deals in the housing market right now due to short sells and bank-owned properties, so that leaves people with less-than-perfect credit to apply for most of the rental property available.  Landlords know this, so the good news is that bankruptcy will likely help your chances of renting more than hurt your chances.

As long as your bankruptcy has been completely discharged, your landlord will likely concentrate on the credit you’ve used after filing.  Your landlord will also recognize the fact that now that your debts have been discharged, you will likely have more cash flow to pay your rent and other living expenses.  This is a plus for him or her in assuring that money will be paid on time. 

One thing to keep in mind—whether you have filed bankruptcy or not—is that you should not attempt to rent if the amount is more than 30% of your gross income.  Keeping your search to one that is in the range of housing you can afford will be crucial to getting approved as a renter.  Another thing to keep in mind is that honesty regarding your financial past, including the details relating to your bankruptcy, will be important in your agreement with a landlord.  If you honestly explain the situation that led to your bankruptcy and are able to show how well you have handled your financial affairs post-bankruptcy, many landlords will work with you to make sure you have a home to live in. 

What other services does Bankruptcy Law Clinic offer?

What Bankruptcy Can and Cannot Do

An increasing number of Americans are filing for bankruptcy due to unforeseen circumstances, medical expenses, divorce, or simply poor financial planning.  Because of this, you will hear a lot about bankruptcy from local media sources suggesting that bankruptcy might be a good option for you, as well, if you are struggling to meet your financial responsibilities and to pay your debt. However, there are also several common misconceptions about bankruptcy, and these range from how easy it is to file for bankruptcy to what it will actually do for you. 

First, bankruptcy is one solution for handling your overburden of debt; it is not a guaranteed pass to immediate credit. It is a myth that filing for bankruptcy will always give a consumer a new start with credit right away.  In fact, depending on what type of bankruptcy you file and the circumstances in which you filed it, it could still be 5-7 years before you are able to buy or rent a home without a significant down payment to compensate for your credit history.

Second, bankruptcy is not always a clean slate.  Sometimes, not all debts will be discharged (such as student loans, taxes, etc.) and under Chapter 13, you will still need to pay back some of your debts.  This amount will be determined by the court, which will set you up on a court-ordered payment plan that has been renegotiated to better terms. 

Finally, bankruptcy is a long and tedious process; it is not a quick and easy solution to your financial troubles.  There will be many documents and statements to collect, many forms to fill out, and you will need to spend the money on a lawyer who has expertise in bankruptcy law for your particular state.  Many courts also require that you attend financial planning and budgeting classes as part of your commitment to work toward a more responsible financial future.  

Will My Bankruptcy Hurt My Co-Signer?

The decision to file for bankruptcy isn’t one that most people take lightly, especially if that decision will affect others.  An example of how your bankruptcy could affect others is if there is a co-signer on one or more of your debts.  In cases for which there is a co-signer, the obligation to repay the debt might still fall on your co-signer, even if your bankruptcy is granted.  Whether it does or not is usually dependent on whether you file Chapter 7 or Chapter 13.

In a Chapter 7 bankruptcy, your co-signer will likely be left with the responsibility of paying the debt, and it will likely not be discharged for him/her, even if it is discharged for you.  This means that you will no longer have the responsibility of paying it, but your co-signer will.  This type of situation can cause conflict among people if not carefully discussed, particularly if the co-signer is a close friend or family member with whom you have a lot of contact. 

In a Chapter 13 bankruptcy, your debts will not be completely discharged, but will rather be rearranged and placed on a court-mandated repayment plan.  If you make these payments on time, your co-signer will be under what is called a "co-debtor stay” and will not be held responsible for any of the debt while you pay it off.  They will also not be responsible for any discrepancy in the amount of debt owed before the bankruptcy and the final amount the court orders you to pay for that debt. 

Before you file for bankruptcy, it is important to remember that whatever debt you have in which a co-signer has signed with you, your late payments or missed payments will affect their credit negatively.  Co-signers often have a better credit rating than the primary signer, making their own score more vulnerable to taking hits when they agree to co-sign.  This is why you should be extremely cautious in asking someone to co-sign with you; if you are unable to pay the debt, it might result to a conflict between the two of you.  

Not All Debt is Discharged through Bankruptcy

Just because you file and are granted bankruptcy doesn’t mean you won’t be responsible for paying back some of the credit card debt you’ve accrued.  Some transactions – particularly ones made for non-essentials after the debtor was unable to make payments on time – are looked at unfavorably by the courts. If the courts see that you were unable to make steady, on-time payments, but were still charging nonessential items like travel, entertainment, or electronics to your card, they will likely be hesitant to discharge those debts.  

If you are considering filing for bankruptcy, the best thing to do is to immediately stop using credit.  All types of credit card transactions should be stopped, particularly if they are in a non-essential category or for something other than food or gas.  Even essential purchases can fail to be discharged if your card use was recent. 

Other types of debt that will likely not be discharged through bankruptcy are debts for taxes, fines, alimony, or child support.  Student loan debts are equally as difficult to have discharged – mainly because many of them are funded in part or in full by the government. You might get a portion of the interest rates lowered but depending on the lender of the loan, full discharge of student loan debt is unlikely. 

   

Filing for bankruptcy might be a good option if you have mostly consumer debt on high-interest credit cards.  If most of your debt is not consumer debt, or is debt related to student loans, bankruptcy might still be a viable and wise option for you.  An attorney will be able to look at your specific situation to help you determine all of your options, including whether or not bankruptcy is the best idea for you to get back on track financially.  

Reasons Most People File for Bankruptcy

Of the top reasons people file for Bankruptcy in the U.S., the following list of three factors accounts for the purposes of the bulk of bankruptcies filed in this country. 

1. Medical Debt

Anyone who has ever fallen ill from an unexpected sickness or has been diagnosed with a life-threatening and life-altering disease understands the enormous cost of medical care.  Even if you are insured, many insurance policies are underwritten to save the company as much money as possible, leaving you on your own to pay for high-cost tests or treatment options for life-threatening diseases.  If you are uninsured, then there is no doubt that the medical costs of a major accident or diagnosis can add up quickly, depleting your hard-earned savings and putting your family in debt that seems impossible to escape. 

2. Creditor Harassment

If you have gotten behind on credit card payments, car payments, or other debt, you already know the extent to which creditors can harass you.  Despite legislation limiting how creditors can contact you, they will still call multiple times throughout the day; call your job; call your friends and known relatives; and overall, make the stress of financial problems many times worse. 

3. Downsizing or Loss of Job

If you are one of the millions of Americans affected by the sustained job loss of the past 5 years, you already know how a few months of missed work can eat into your savings and leave you unable to make your payments.  If you lose your job and have a lot of debt, your financial future can seem overwhelming, and bankruptcy then becomes one of the few ways to reestablish a solid financial future.  

How Debts Are Discharged In Bankruptcy

A common misconception is that when debts are discharged during a bankruptcy, the tax payer picks up the burden.  This is simply not true – in the process of a bankruptcy, the creditors are the ones who take a financial hit.  They do this by often getting pennies on the dollar amount of what they originally loaned, so it’s never a pleasant process for them.  

When a court declares your debts discharged, it essentially becomes illegal for creditors to contact you about the debt.  However, not all debts are discharged and this is why it is important for you to contact someone who can advise you regarding bankruptcy law and which part of your debt is most likely to be discharged.  Every bankruptcy is different and bankruptcy laws vary widely, state by state.  A bankruptcy attorney will be able to counsel you regarding the laws that are particular to your state and give you a good indicator if bankruptcy is really your best option. 

Starting fresh is an important part of beginning on a road to financial freedom and recovery.  A court will be able to look at your situation – past, present, and future – and determine your ability to reasonably pay off your debt.  If the court finds that some debts should be discharged, they will focus on the high-interest ones and determine if you will pay them back partially, or not at all.  Since each bankruptcy is different, it is impossible to determine exactly which debts will be cleared by the courts, but a bankruptcy attorney will be able to give you a good estimate of what might happen in your particular situation.  

The Truth About Credit Cards and Bankruptcy

Used correctly, credit cards can be a useful financial tool. However, if your balances are spiraling out of control, they can become an awful burden. Nobody plans on running up credit card balances but once you got a balance you can’t handle they can become a burden. Use our debt calculator and learn the sobering truth of how long it will take you to pay off your credit cards if all you can do is pay the minimum. As you move through life, the debt begins to weigh you down, keeps you from sleeping and starts to affect your family life and work and prevents you from getting ahead.
We can help!

How to tell if your credit card debt is out of control

Can you answer yes to two or more of the following questions?

• Have you maxed out more than one credit card?
• You don’t know how much debt you have?
• Are you flipping debt from one credit card to another?
• Do you leave your monthly credit card statement unopened?
• Are you struggling to pay the minimums on your credit cards trying to preserve an inflated credit score, hoping for better days ahead?

If you answered yes to two or more of these questions, you should talk to one of our experienced bankruptcy attorneys. The best way is to set up a free no obligation consultation by calling us at 305-663-3281. What is more important your family or your American Express?

Credit cards post-bankruptcy

One of the common myths regarding bankruptcy is that you won’t get new credit. Not true! In fact, many of our clients get credit card offers within 3 months of their bankruptcy discharge. True, these are small $500 limit cards with ugly interest rates, but they may be the key to rebuilding your credit. Post-bankruptcy discharge all your unsecured debts are wiped out. Unburdened by existing debt, and with your current income, you actually become a fairly attractive candidate for new debt. Use these new cards heavily, but responsibly (PAY THE TOTAL BALANCE EVERY MONTH OR DON’T USE) - they can be the key to reestablishing your credit history and getting a 700+ credit score within 2 to 3 years. Some of clients have been able to finance cars at a decent rate with 12 months of the bankruptcy discharge and purchase a house within 24 months. The key is to use new credit heavily, but to run no balances month to month. You can do it!

To find out more set up a free no obligation consultation by calling us at 305-663-3281.