Get Out Of Debt

Medical bankruptcy is one of the most misunderstood terms in medical finance. There is actually no “medical bankruptcy”. That being said, medical problems have consistently been one the 3 leading causes of bankruptcy in the United States.

Although there is technically no medical bankruptcy a medical problem can certainly cause you to find yourself in bankruptcy court. Medical problems can be a double whammy; they reduce or eliminate your income and cause you to incur massive debt. In many cases you have virtually no chance of ever repaying this debt, it’s just too large. Many people find themselves in a position of losing their homes and other valuable possessions in an attempt to repay their huge medical bills.

Often, seeking the protection of bankruptcy isn’t something desirable but it’s seen as the only way out. You may think that having health insurance will provide protection against such a financial calamity, however almost 50% of all bankruptcies are caused by people facing massive amounts of medical debt even though they had medical insurance at the time of their accident or illness.

Sadly, there are also a significant percentage of medical related bankruptcies that are filed by people that aren’t really facing huge medical bills. Almost 40% of medically related bankruptcies were filed by people who owed $5,000 or less in medical bills. In many cases this is due to the medical industry being much more aggressive in collection actions than they once were. In other cases people are just not educated about how to proceed in such cases. Once the collection letters begin arriving, fear sets in, and many people just don’t look at all their options.

Yes, filing a chapter 7 bankruptcy can protect your assets and allow you to keep your primary residence if your home falls within state guidelines. These vary by state. Filing for bankruptcy protection however, is can present you with huge problems down the road and will essentially destroy your credit rating. You should carefully consider your other options before considering using bankruptcy as a shield to protect you from medical bills.

You might consider calling an attorney in your state that specializes in such matters. Your first call however should be to your creditors. The first line of defense should be making arrangements for some sort of alternate payment plan. Bankruptcy is a messy business and most creditors would rather avoid is almost as much as you would.

Bankruptcy FAQ

How much will Bellevue bankruptcy cost me?
Bankruptcy cases generally cost about $1000 and $2000 for a Chapter 7. While this is a good estimate, prices will differ depending on your situation and the type of bankruptcy that you file. A Chapter 13 is much more expensive because it take much more time and work.

Will I lose everything?
No you will not. Depending on the type of bankruptcy you file under, you may not lose anything at all. If you file Chapter 13 the bankruptcy court does not require you to give up any assets. In a Chapter 7 the bankruptcy court will require you to give up any non-exempt assets, but with the help of a bankruptcy attorney most people who file bankruptcy must not give up any assets.

Will my creditors leave me alone?
They certainly will. Once you submit your bankruptcy petition, your creditors will no longer be allowed to try to get money from you. This happens because the bankruptcy court will send an automatic stay to all your creditor on your behalf. This automatic stay legally prohibits them from trying to contact you at all.

How will bankruptcy affect my credit score?
A bankruptcy can remain on your credit report for 10 years after you file bankruptcy. Most people are not approved for a mortgage loan for 2 – 3 years after they file bankruptcy. However, most people find that after 3 years the major effects of bankruptcy have greatly decreased.

What happens during bankruptcy?
Before filing bankruptcy, all debtors are required to complete a credit counseling course. This course can be completed in person, over the phone or online. Your attorney will help you sign up for it.

Your bankruptcy attorney will then help you get the necessary paperwork together so that your request is filed correctly with the bankruptcy court. Once you have filed, an automatic stay is put into place. This prohibits your creditors from contacting you anymore.

You will then prepare a list of all your assets and debts. Your assets will be divided into two groups, exempt and non-exempt. You will keep all your exempt assets and your attorney will protect your possessions by making them exempt. You will bring this list to a meeting with your creditors and a trustee appointed by the bankruptcy court. The trustee will take your non-exempt assets and sell them. The money raised will be payed to your creditors. The rest of your debt will be discharged.

All you have left to do is take a personal financial management course that can also be completed in person, by phone or online. After that you are living your new debt-free life!

Chapter 13 payments are arranged through the reorganization of debt at the time when bankruptcy is filed. The debtor is required to make regular payments directly to an assigned Trustee who oversees the case. When Chapter 13 payments are received, the Trustee disperses payments to creditors until accounts are paid in full.

In some instances, Chapter 13 payments can be made through payroll deductions if approved by the bankruptcy court. Upon acceptance of the bankruptcy repayment plan, chapter 13 payments are setup to repay creditors and tax liens, if applicable.

If the debtor owns a home, filing Chapter 13 bankruptcy can halt the foreclosure process. However, if the debtor fails out of bankruptcy, the lender has the authority to initiate foreclosure proceedings. Additionally, the court may require the debtor to liquidate their assets under Chapter 7 Bankruptcy Code. If this occurs, the debtor must relinquish their property to a Trustee who will sell the assets and repay creditors.

Chapter 13 bankruptcy is available to all U.S. citizens. This chapter allows individuals to reorganize their debt and make payments over an extended period of time. However, certain eligibility requirements must be met and include outstanding unsecured debts must be less than $307,675 and secured debts must be less than $922,975. Additionally, the debtor is required to undergo credit counseling within 180 days prior to filing.

When an individual files Chapter 13 bankruptcy they must provide a certificate of credit counseling, proposed repayment plan, proof of income, detailed list of expenses, and a recent year tax return.

Collection actions against the debtor cease when the debtor files Chapter 13. However, it does not dismiss outstanding balances. As long as payments are made to the Trustee and disbursed in a timely fashion, no further action will be taken against the debtor. If the debtor is unable to make payments according to their chapter 13 agreement, the creditors can move forward with collection actions.

If circumstances arise that cause the debtor to become unable to make chapter 13 payments, the Trustee must immediately be contacted. If the financial setback is temporary, the Trustee may agree to reducing payment amounts or extending the repayment period.

In cases where financial setbacks are long-term, the court may modify chapter 13 payments, discharge the debts on the basis of hardship, convert to Chapter 7 liquidation, dismiss the Chapter 13 case, or temporarily suspend payments.

Chapter 13 bankruptcy provides individuals with the opportunity to retain their property and make a fresh start. When creating the repayment plan it’s crucial to arrange chapter 13 payments that are reasonable so the debtor can consistently make payments in a timely fashion. Otherwise the effort will be fruitless and cause the debtor to fail out of bankruptcy and lose their home, automobile and other valuable assets.

If your HOA is trying to force a foreclosure on your condo or townhouse due to unpaid association fees, then it may be likely that they have a lien on the property. This may have been the result of some type of confession of judgment if you ever fell behind or due to the association suing you in civil court. Otherwise there may be some clause somewhere in your HOA paperwork that lets them sue you for a foreclosure if you fall behind on the association dues.

Either way, the HOA is attempting to collect the amount of money they are owed by you for utilizing the services of the HOA (such as they may be). Because you have been unable to pay them for whatever reason, they are now trying to sue you and request that the courts auction off your property to satisfy the unpaid fees. Even if the arrears only amount to a few hundred or thousand dollars, it is quite easy for creditors to force a foreclosure on a large asset such as a property – do not stop worrying just because the HOA fees may be such a small dollar amount.

Bankruptcy, when you file it, stops the collection of any debts you include in the bankruptcy filing until the debts are either discharged or you begin a legal payment plan through the courts. So, the HOA will have to halt any collection efforts if you file Chapter 13 bankruptcy, as long as you include your HOA debt in the petition. You are seeking legal protection from your creditors, and all of them, including the Homeowners Association, must stop trying to collect as long as the issue is in the bankruptcy court.

Thus, the HOA is acting to collect a debt that they are owed by pursuing foreclosure against you. Filing bankruptcy will force them to put their foreclosure process on hold until you work out an arrangement with them. In most cases, you will have to enter a 3-5 year payment plan through the court system to pay back the unpaid fees. If you make it through the plan, then you will have no worries about them foreclosing on the house because you will have paid back any amounts that you were behind. Not being behind means that there is no reason for foreclosure.

But, if you fall behind on the bankruptcy payments, the HOA can have the debt taken out of the filing and have the automatic stay released and begin foreclosure again from the point at which they left off before the bankruptcy. As well, you will be responsible for your regular HOA dues, in addition to the portion you are paying through the court payment plan. Therefore, it is a waste of time, not to mention severely damaging to your credit, to file Chapter 13 if you are unable to afford the regular payment plus a portion what you are behind.

You should probably consult with an attorney or other financial adviser to make sure you are doing everything correctly and work out a budget so you do not fall behind on the payment plan. Although it is possible to file bankruptcy on your own, there are many reasons why it may be a better idea to rely on professional legal advice during such a potentially stressful time. Foreclosure situations, whether they are from the original lender or another party such as the HOA, almost require outside assistance, even if just to make sure you have been as careful as possible and will not have your solution thrown out on a technicality.

Bankruptcy is a legally declared inability of an individual or organization to pay creditors. During the course of a bankruptcy, a debtor may ask a court to dismiss the case. If the court finds that dismissal will not harm the creditors, ordinarily a court will grant a petition to dismiss a Chapter 7 or a Chapter 13 bankruptcy.

There are several reasons a debtor may prefer to file a Chapter 13 bankruptcy petition. The reasons include the debtor wishes to resolve certain debts that may not be discharged in a Chapter 7 bankruptcy. The debtor may also wish to protect certain cosigners on personal loans from being pursued by creditors for repayment or feels obligated to repay certain debts. The debtor may believe that future creditors will look more favorably on Chapter 13 reorganization than a Chapter 7 discharge. A debtor may be required to file a Chapter 13 bankruptcy if he or she has received a Chapter 7 bankruptcy discharge within the prior six years, or obtained a Chapter 13 bankruptcy discharge within the prior six years and has not paid off at least 70% of the unsecured debts and was subject to the discharge of a prior Chapter 7 or Chapter 13 bankruptcy filing within the prior 180 days, because the debtor violated a court order, or requested dismissal after a creditor sought relief from the automatic stay.

After filing a Chapter 7 bankruptcy petition, some debtors discover that they are better served by pursuing relief under Chapter 13. By filing an appropriate motion with the bankruptcy court, the debtor has an absolute right to convert the petition to a Chapter 13 filing, if the debtor has not previously converted a Chapter 7 bankruptcy to a Chapter 13 bankruptcy, and the debtor’s estate qualifies for Chapter 13 relief.