What Will It Take To Eradicate The Need For Medical Bankruptcy?-Image by Getty Images via @daylife

Americans are in debt, and it’s not just credit card debt which is raising the ire of both citizen and politician. Medical debt continues to be a serious issue which offers no “traditional” answers; but instead requires radical thinking about how we approach healthcare in this country.

As it stands, a full 62 percent of all bankruptcy filings in this country are caused by medical bills.  That’s well over half and that’s not counting all of the debtors who don’t bother to file bankruptcy due to fear or ignorance about their rights. Compare that to Canada, which has a miniscule amount of medical bankruptcy filings but has a universal healthcare system which is paid for with taxes, not individually. In this country, many debtors who end up drowning in medical debt have health insurance. They either pay for it through their work or individually. However, with the exception of the most premium health insurance programs, the amount of healthcare actually covered is not enough to prevent a major illness from bankrupting the average American. The truth of the matter is that the average American cannot afford health coverage in this country; not the premiums and definitely not the out of pocket expenses which can run from a few hundred dollars a year to tens of thousands of dollars worth or medical debt after a major illness. The good news is that we have a bankruptcy system which is flexible enough to discharge medical debt. But the bad news is that for those who have ongoing healthcare needs which they can’t afford to treat; bankruptcy is only the beginning of their journey. For those who have exited bankruptcy, right now the best options are group plans which offer adequate coverage which will minimize the chances of accumulated more medical debt.

(source: http://www.cardiovascularbusiness.com/index.php?option=com_articles&article=26659&publication=29&view=portals)

Chapter 9 Bankruptcy And Its Impact On You-Image via Wikipedia

Chapter 9 bankruptcy or what is commonly called municipal bankruptcy allows cities and towns to restructure its finances in much the same way that a Chapter 11 bankruptcy allows a business to restructure its debts. But what impact will a Chapter 9 bankruptcy have on individuals living in that town. Let’s take a look at a few:

1. A city in a Chapter 9 bankruptcy will be forced to work within a budget to pay down its debts.  This could mean that those living within a bankrupt city will face an increase of taxes while there is a decrease in services.  Cities in municipal bankruptcy may need to cut essential services such as reducing the number of firefighters and police officers on the street.  Or, reducing the hours of the library branches.  Other reductions could also include fewer trash pickups.
2. Chapter 9 bankruptcy will give a city the power to renegotiate collective bargaining agreements. For example, the city may be able to reduce the amount of pay that city workers receive or even reduce their benefits, something that would be nearly impossible outside of municipal bankruptcy. If you work for the city, you could face a pay freeze. Or, if you’re retired and receiving a pension, the maximum amount you can receive may be reduced if the city can convince the bankruptcy court that is necessary for the municipality to get into the black financially.
3. While there may be some initial hesitation by investors to buy the municipal bonds of a city in Chapter 9 bankruptcy, once the city creates a feasible plan to restructure its finances it will be better positioned to attract investors to the city.

(source: http://www.courierpostonline.com/article/20110227/OPINION01/102270331/1005/OPINION/Municipal-bankruptcy-should-last-resort)

When Is A Creditor In Violation Of A Bankruptcy Discharge Order?-Image via Wikipedia

In a recent Chapter 7 bankruptcy, a debtor was hounded and pursued by a bank after their bankruptcy discharge. The creditor in this case never challenged the bankruptcy discharge; but instead pursued unavoided liens post-bankruptcy.  The creditor had a state court judgment that said the debtor must return property to the creditor. However, the debtor said that they did not have possession of the property.  Once the creditor was informed that the debtor did not have possession of the property, an arrest warrant was issued for the debtor. The debtor was arrested and agreed to pay $750 per month to the creditor so that they could be released from jail.  Is this a violation of the bankruptcy discharge order? Yes.  While a creditor has the right to pursue liens which are not avoided during bankruptcy, they cannot make the debtor involuntarily pay a debt which has been discharged. For example, if there is a lien against the home of a debtor who has received a bankruptcy discharge, the creditor can repossess the home; but they cannot sue the debtor in an effort to make them pay the mortgage.  The debtor can voluntarily pay if they choose; but they cannot be put under pressure to pay by the creditor. Here’s what the bankruptcy code has to say about the bankruptcy discharge order:

The effect of the discharge is not to extinguish the debt, but rather to release the debtor from personal liability. Hall v. National Gypsum Co., 105 F.3d 225 (5th Cir. 1997). Thus the discharge voids the in personam liability of the debtor, but it does not affect the creditor’s in rem rights with respect to property. Matter of Paeplow, 972 F.2d 730 (7th Cir. 1992); Matter of Hunter, 970 F.2d 299 (7th Cir. 1992). It has long been a fundamental principle that unavoided liens pass through bankruptcy unaffected by the debtor’s discharge.⁹ Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992). Thus, a bankruptcy discharge does not affect a security interest that a creditor may have in the debtor’s property. Important here, the creditor’s lien “sticks” with the asset not withstanding transfer of the asset by the debtor. Matter of CMC Heartland Partners, 966 F.2d 1143, 1147 (7th Cir. 1992).

Since the debtor in this bankruptcy case no longer had the property in question it would have been in the best interest of the creditor to file an adversary proceeding with the bankruptcy court charging the debtor with an illegal transfer of assets.  However, the creditor took no such action. The debtor in this case was granted damages due to the creditor’s actions.

(source: http://leagle.com/xmlResult.aspx?xmldoc=In%20BCO%2020110302827.xml&docbase=CSLWAR3-2007-CURR)

Three Signs That You Need Bankruptcy Relief-Image via Wikipedia

In 2010, more than 1.5 million Americans filed bankruptcy, that’s an increase of 9 percent from 2009 and the highest number of bankruptcy filings since the controversial bankruptcy reform law was passed in 2005.  But surprisingly many experts believe that there are even more Americans out there who need to file bankruptcy but either are avoiding it or don’t understand that they have a real need for bankruptcy relief.  Does that sound like you?  Let’s take a look at three signs that you may need bankruptcy relief.

1. Your house is facing foreclosure and you can’t do anything about it because you’re money is tied up paying other debts.   Many debtors who file bankruptcy do so because they want to save their home for foreclosure.  Bankruptcy allows them to discharge other unsecured debts such as medical bills and credit card debts so that they can put more of their money towards paying the mortgage.
2. You are struggling to pay medical debts that you owe and which your insurance provider won’t cover.  It’s an unfortunate reality, but many Americans are being financially ruined by medical debt which they simply cannot pay.  Some of them don’t understand that bankruptcy can discharge all medical debt and give them a fresh financial start.
3. You are being sued by creditors and/or your wages are being garnished. Getting in a legal entanglement with creditors is a disaster which bankruptcy can handle. Once a debtor files bankruptcy, the automatic stay stops creditors’ legal proceedings against the debtor. This means that if a creditor is suing the debtor or garnishing their wages, after the bankruptcy is filed they must cease immediately.

(source: http://thedowneypatriot.com/bookmark/11594996-Choosing-the-right-type-of-bankruptcy-for-you)

Credit Card Companies Continue To Abuse Youthful Ignorance-Image via Wikipedia

The CARD Act was suppose to put a lid on the virulent marketing of credit cards to young people but according to some experts, the situation has not improved much. Young people are still in debt with credit cards and credit card companies are coming up with creative ways to bilk the youth of their last penny.

Jim Hawkins, an assistant law professor at the school, found that 76 percent of more than 300 undergraduates surveyed under age 21 had received a credit card offer since the beginning of 2010. There also was little difference in credit card marketing between the freshmen who entered school after the law took effect and the upperclassmen.

What’s more, roughly a third of freshmen already had a credit card, Hawkins’ survey found. One way the students got around the income requirement: Almost one-third used student loan proceeds as part of the income reported to card issuers when they applied.

Income requirements are minimal for the cards because they are based on ability to pay the minimum monthly amount, not the entire balance, Hawkins said. Other loopholes the banks have found include using students’ e-mail addresses or putting offers on Facebook that include gifts if they fill out an application, Hawkins said.

The fact that credit card companies are using Facebook and the rest of the internet to ensnare youth into debt is disgusting.  These companies are clear on the fact that the students don’t have significant income to repay credit card debt. But that’s the point, right? Get the youth and drain them with high interest and fees, this is a credit card industry strategy. The fact that the income requirements are based on the ability to pay the minimum payment and not the balance is almost criminal. We all know that paying only the minimal balance can leave you indebted for years paying thousands of dollars in interest to a credit card company. That was the whole point of the CARD Act, to level the playing field and give Americans the opportunity to get out of debt.  But instead our youth remain at risk. And if you thought that the co-signer requirement would save our youth from credit card debt, you’re wrong.  The CARD Act allows the credit card co-signer to be anyone, as long as they are at least 21 years old.  That means that college students can co-sign each other’s credit card applications and put themselves in a word of financial trouble. Envision a new type of peer pressure where those who want to “fit in” sign onto a several years of debt for “friends.”

(source: http://www.star-telegram.com/2011/02/17/2858645/credit-cards-still-being-marketed.html)

Among the many things to think about when considering bankruptcy, is “Which set of exemptions should you use?”  The book, Personal Bankruptcy For Dummies, speaks of the choice that debtors are faced with.

The book says:

“Although bankruptcy law is generally the province of the federal government, a number of states have their own provisions with regard to exemptions, giving people the chance to choose between exemptions offered under the Bankruptcy Code (federal exemptions) and those provided by their own state legislature.”

The book goes on to list several states, among those, Texas, where the following rule applies, “Debtors can choose local or Bankruptcy Code exemptions, based on the jurisdiction where they lived for the longest period during the 180-day span immediately preceding the petition date.”

Also, an important thing to mention is that debtors can’t pick and choose different exemptions.  You have to use one set of exemptions or the other.  If you thought that you could just pick different ones here and there, think again.

A debtor will of course choose the set of exemptions that will benefit them the most, but the hard part is figuring out which set of exemptions is the best for your situation.

A high-quality bankruptcy attorney will know all of the little known details of the different sets of exemptions, so it is important to get expert advice.  If you are faced with difficult financial decisions, contact a bankruptcy attorney as soon as possible.  The amount of help that an attorney can provide will out weigh any cost that you are afraid of.  Find out what exemptions you will be allowed, by contacting a bankruptcy attorney.

Imagine flying somewhere only to end up stranded at your destination, because the airline you used to get there suspended operations.  This scenario turned into a reality for some SkyEurope passengers.  The passengers were forced to buy tickets from other airlines in order to return home.

An article on USATODAY.com documented the situation for the airline.  The article said, “SkyEurope Airline AS, a Central European discount airline, said Tuesday it has filed for bankruptcy and that all its flights, sales and operations have been suspended immediately.  The company cited the ‘lack of sufficient interim funding to finance ongoing operations.’ Trading in the company’s stock was suspended from the start of trading on Tuesday, a statement from the Vienna Stock Exchange said.  The troubled airline obtained credit protection in Slovakia in June.  It reported a loss of close to euro60 million ($85.63 million) in the 2007-2008 business year, with a turnover of euro260.9 million ($372.36 million).”

The airline has been having issues dealing with its debts recently, even going as far as asking its employees to wait to be paid.  The company said at that time that it would have to suspend operations if a majority of the employees would not agree to wait.  Most of them did agree.

In any case, the bankruptcy seems like something predestined.  The airline started operating in 2002, and hasn’t made any money since.  There aren’t many companies that can survive as long as the airline did under those circumstances.

The company probably should have sought bankruptcy protection sooner, because the company likely wouldn’t have had to suspend operations.  Problems just began to compound on each other, and there wasn’t any way out.  If you are having extreme financial difficulties in your life, don’t let them get that bad.  Most, if not all, of your debts can be wiped out.  Contact a bankruptcy attorney as soon as possible to figure out what will help you now.