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Dear Bankruptcy Adviser,
My husband had a transplant a few years ago. One
year later, we purchased a new home. We knew the
drugs would be expensive but planned for most
to be covered by insurance. Long story short,
we ended up with more than $30,000 in medical
(bills) two years in a row. We are now $100,000
in credit card debt. We now have insurance that
covers the meds but just cannot get caught up.
We are behind on our mortgage and credit cards.
I make too much money, $55,000 a
year, to qualify for a Chapter 7 (bankruptcy),
and my husband brings home $1,100 a month in disability.
He has been desperately trying to find a job now
that he is well, but obviously this has not worked
out yet. We are in our early 50s, and the thought
of bankruptcy is almost more than we can take.
I can borrow from my retirement but keep thinking
he'll find a job and bail us out. We are sick
over this predicament we are in. We've always
had good credit and now have numerous 30- and
60-day delinquencies. We would appreciate your
advice.
-- Jan
Dear Jan,
I know you must feel like the walls are caving
in. You are getting hit with unforeseeable and
unmanageable debts. However, you do have options,
albeit limited ones.
You state that you do not qualify for Chapter 7 bankruptcy. I hope that you had a thorough consultation with a local bankruptcy attorney. Make sure that the attorney did a detailed review and not just a general one. You want to get an analysis as to whether the presumption arises that you can pay back some of your creditors.
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1. Chapter 7 with thorough consultation
Do not rely on an incomplete analysis or a verbal denial that you do not qualify. It probably is worth the cost of paying an attorney to review six months of paystubs and providing a detailed expense breakdown.
For starters, do not base your decision on the average income in your state. Many clients have thought that they automatically wouldn't qualify for Chapter 7 bankruptcy if they make above the average income in their state. This is not true.
In the end, you might be correct, but at the very least you were thorough and received detailed advice.
2. Chapter 13 reorganization
Chapter 13 bankruptcy might be your only viable option. This is a three- to five-year repayment plan with the court. The payment will be determined based on your income and reasonable and necessary expenses. All remaining balances owed on the credit cards and to the hospitals will be eliminated after you complete the Chapter 13 repayment plan.
As long as you make your monthly payment, you will be protected. The creditors cannot sue or harass you.
3. Nonprofit payment of medical debt
You should search for a nonprofit organization
that might help you with your medical bills. The
Internet is an excellent resource to find these
organizations. You also could contact local, state
or federal representatives. Many U.S. congressional
offices are perfect sources of information.
4. Credit counseling
Most credit counseling agencies work with only a limited number of creditors. You should explore this option, but only use their services if all your creditors are paid through the program. I believe it is impossible to pay some creditors through credit counseling organizations while paying other creditors outside of the counseling plan. The multiple payments usually are simply too high.
Ignoring the problem is the worst thing you could do. I cannot even begin to imagine the stress you are under, but add lawsuits, wage garnishments, even bank levies, and you could go over the edge. You must proactively address the problem so that you can make a decision immediately.
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