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Edmonds Bankruptcy Law Blog

Bankruptcy may erase high medical bills and credit card debt

In Washington state, is there relief for a senior couple who are near 80 years old, the wife suffers from a heart condition requiring recent surgery, and they have amassed a credit-card tab of $70,000? The medical bills for the surgery and hospitalization will surpass the available coverage under Medicare, so that the couple's debt load will undoubtedly be overwhelming and unmanageable. Barring a lottery windfall or some other unexpected resource, the circumstances reasonably and realistically call for a Chapter 7 bankruptcy.

The woman owns a house with her husband which has about $50,000 in equity. After closing costs on an equity loan the proceeds to them would probably be less. The monthly credit card minimum payments add up to more than their Social Security income combined. The couple is sick with worry that they have to give up their house and go into low-rent housing.

Chapter 13 bankruptcy is a payment plan for secured debt

The best way to keep one's home in Washington state when the mortgage payments have fallen behind is to file a Chapter 13 bankruptcy. No other program compels the mortgage holder to accept monthly payments to get the back amounts paid and the loan up-to-date and current. This can sometimes work even where the borrower has received a foreclosure action against the residential property. In such situations, there is an emergency need to consult with an experienced consumer bankruptcy attorney who is familiar with handling Chapter 13 cases.

The basic structure of the Chapter 13 is that it is a payment plan. Monthly payments are made to the Chapter 13 Trustee for a period of 36 to 60 months. The details are set forth in the debtor's Chapter 13 plan, which must be reviewed and approved by the bankruptcy court. The plan will show that all payments on a secured loan (one with collateral such as a house attached to it) will be up-to-date and current by the end of the 36 or 60-month payment plan.

High medical bills are leading the elderly to file bankruptcy

In Washington State and throughout the country, there is a steady flow of people age 65 and over who are filing bankruptcy to obtain debt relief. The biggest cause of this trend is medical bills that older individuals cannot afford to pay. In fact, medical debt is now the biggest single source of bankruptcy filings in the country.

The reasons for the steady increase of older filers is simple. They can permanently wipe out accumulated high medical debt without making any payments, and they can do it very quickly. Medical bills, like credit card bills, are unsecured debt, meaning that the amount owed is not a lien on real estate or other property of the debtor.

Medical debt need not lead to permanent financial crisis

Washington residents are just like everyone else when it comes to predicting their futures: They are not able to do it. One of the most unpredictable aspects of daily life has to do with physical health. If one makes healthy lifestyle and eating choices, chances are good that one will enjoy many years of good health, although there is no guarantee. When an unexpected health crisis arrives, it can result in tremendous medical debt that those affected are completely unprepared to meet.

Even minor health issues can create piles of unpaid medical bills. It seems hospitals charge for anything and everything they can these days, right down to a band-aid a nurse might hand to a patient with a laceration. The only problem with that is that the same band-aid that would cost pennies at a local pharmacy may show up on a medical bill costing as much as $10 a piece.

Bankruptcy is not the easy way out, but might provide fresh start

When money problems become overwhelming, consumers in Washington will likely consider their options. While bankruptcy can help to resolve money problems, it could have an adverse effect on a person's future because it will stay on his or her record for several years. However, if bankruptcy is determined to be the only option, professional legal advice can ease the process.

Chapter 7 bankruptcy can provide almost instant debt relief because the court can discharge all unsecured debts like credit card and medical debt. It comes at a price, though, because the court will appoint a trustee to arrange a liquidation sale of non-exempt assets. Chapter 13 bankruptcy is much less severe, and provides the opportunity to continue paying off debts over three to five years and have remaining balances discharged at the end of the period.

Chapter 7 bankruptcy for some home-based online clothing sellers

It appears that many women who own and operate home-based businesses selling Lularoe apparel and accessories are seeking bankruptcy protection. A review of 24 Chapter 7 bankruptcy cases in which the company was named found that many women experienced a steep decline in sales over recent years. That has left some with little option but to seek aggressive debt relief. For those in Washington who own and operate their own online retail venture, this story may serve as a cautionary tale.

Lularoe experienced enormous growth over the past few years. That success led many individuals to sign up as sales representatives. Online clothing sales have become very popular, and more and more people have been drawn to the idea of shopping for new clothing from the comfort of their own home. Quite a few sellers made solid incomes for one or more years before encountering difficulty moving their products. It's possible that the market simply became saturated, leading some retailers struggling to keep their business afloat.

Medical bills can lead to need for debt relief

It is absolutely possible for a Washington resident to do everything right in preparation for retirement, yet still encounter significant financial difficulties. For many, medical bills present a huge challenge -- one that can eventually lead to the need to file for bankruptcy protection. A recent article looks at the example of one retiree.

After decades working for an auto manufacturer, he had amassed a decent pension and owned a home, in addition to his Social Security income. However, the sudden onset of illness derailed his retirement plans. After discovering that he needed a liver transplant, his medical bills quickly mounted.

Can taking on new debt assist with debt relief?

Faced with mounting levels of debt, many Washington residents are in search of effective and lasting relief. Debt relief comes in many forms, ranging from restructuring of debt all the way to filing for personal bankruptcy. For many consumers, taking on a personal loan can be an effective way to achieve debt relief.

It may seem counterintuitive to assume new debt while struggling to find relief from existing financial obligations. However, a personal loan with a low interest rate and favorable terms can help consumers regain financial stability. Using borrowed funds to pay down debt that has higher interest rates and excessive fees can be an effective debt management strategy.

Chapter 7 bankruptcy might be the perfect remedy

Some consumers in Washington might say that the worst part of having overwhelming debts is the constant harassment of creditors who call at all hours. They may not realize that filing for Chapter 7 bankruptcy can put an immediate end to those calls. Under the bankruptcy law, an automatic stay comes into effect that prohibits creditors from asking for payments. Consumers may also find comfort in learning that it is a myth that they will lose their homes and cars when they file for personal bankruptcy.

If the equity value of their homes is not too high, and foreclosure action is not in effect yet, Chapter 7 filers can usually keep their homes, and the value of their cars will determine whether they are exempted. Federal and state exemptions typically also protect the filer's tools of his or her trade, along with household goods. The belief that all assets are liquidated and sold at auction is not necessarily true.

Repairing credit score damage during debt relief efforts

Very often, Washington residents take an overly narrow focus in regard to managing their debt. Once the decision is made to seek debt relief, attention turns to the steps required to complete that process. While this is certainly a worthwhile endeavor, consumers may also want to consider addressing credit repair at the same time.

The first step in the credit repair process is to secure copies of all three credit reports. Highlighter in hand, go ever each report carefully, noting any errors or inaccuracies. Include basic information such as address history and employment information, as well as accounts that should no longer be included in the reports. Next, determine the dispute process for each of the three credit bureaus.