 4
options for bills in collections
|  Dear
Bankruptcy Adviser,
My mother had medical bills for open-heart surgery
that were placed with collection agencies in 1996. She has been paying $50 per
month to several collection agencies for the doctor portion and $150 per month
to collection agency for the hospital portion for 10 years as she had no medical
insurance. She recently had to reduce her payments to them due to additional medication
and medical costs. They are cashing the checks. Have they agreed to accept the
new amounts? The collection agency for the hospital portion sent a letter saying
she must immediately pay the remaining $20,000 balance. The only income she gets
at 72 is Social Security. Do I need to hire an attorney to represent her or write
more letters myself?
-- Bonita
 Dear
Bonita,
This is a difficult situation and the most important thing
is that you take action quickly to prevent it from getting worse. However, if
you do, there may be some light at the end of the tunnel.
The
collection agency will take your mother's money any way it comes. Were they accepting
lower payments? Yes, but they will still seek full payment for as long as they
can. Even though your mother is only receiving Social Security income, it is possible
she will be sued by the collection agency. If they get a judgment, the collection
agency's only legal recourse is to place a lien on her home -- if she owns one.
However, they may attempt to levy her bank account as well. This is the real danger.
Many banks erroneously execute a bank levy order even
though the only funds in the account are from Social Security checks.
Also, it's possible that the collection agency may attempt to levy
an account in which your mother is only a co-signer. In other words,
if you co-signed with your mother for an account, it's possible
that the collection agency will levy this account and take your
money. This does happen and it can require a great deal for you
to get your money back.
At
this point, your mother has four options: - Negotiate
a settlement with the collection agency. The collection agency would demand
a significant lump sum payment. She may not have the means, but if you are assisting
her financially, this is a worthwhile possibility to pursue.
- File for bankruptcy. If your mother
does not own a house and has no valuable assets then she should be able to qualify
for a Chapter 7 bankruptcy. With a house, she would need to file Chapter 13. If
there is a nonprofit legal services network in your city that has bankruptcy attorneys
who file pro bono for low-income individuals, contact them immediately. Otherwise,
you will likely need to hire an attorney or at least a bankruptcy documents preparer.
- Take out a reverse mortgage.
If your mother does own a home that is paid off and she simply
lives off her Social Security check then bankruptcy may not be
an option. However, with a reverse mortgage she can pay back the
debt on a monthly basis and protect herself from creditors. If
this is an option then you need to act immediately. The collection
agency is likely on its way to the courthouse right now to place
a lien on the property. If you can get a reverse mortgage and
make arrangements with the collection agency to continue making
payments, that's preferable. An attorney can fight for your right
to resume making payments once a lien has been placed on the property,
but it's time-consuming and costly.
- Hire a law firm to protect her Social
Security checks. There is a service offered by law firms that actually
protects your check. You agree to deposit your Social Security checks into a bank
that they work with and then you pay the law firm an additional monthly fee to
keep the creditors away. The law firm will contact your creditors and inform them
to communicate with you only by mail. At the same time, the bank will make sure
that the creditor cannot levy your bank account.
Bonita, if your mother has bank accounts, I recommend
using a service such as in No. 4 above. If she has a home, a reverse
mortgage may supply her with the funds she needs. If she does not
have a home and cannot make the payments, bankruptcy is probably
her best option. Finally, if you are able to help her with a lump-sum
payment, it may be to your advantage to work with a professional
debt negotiator. Move fast, Bonita -- and good luck.
Justin Harelik is a practicing attorney in Los
Angeles. To ask a question of the Bankruptcy Adviser, go to the
"Ask the Experts"
page, and select "bankruptcy" as the topic.
|
