Law Office of Judith A. Descalso Law Office of Judith A. Descalso

San Diego Bankruptcy Law Blog

Bankruptcy and medical debt: A growing epidemic

Americans spend more in health care costs than any other nation in the world, approximately 10 times the global average, according to the World Health Organization. Therefore it should be no surprise that individuals and families in the U.S. accumulate a significant amount of medical debt. It also isn't surprising that medical debt tends to be the leading cause of personal bankruptcy.

Medical debt can accumulate through outpatient care, inpatient visits, emergency care, nursing care and prescription costs. Many people have experienced rising deductibles in recent years, which leaves individuals hundreds of dollars in debt before health insurance even kicks in for the year. This is for individuals who have health insurance; for others, it can be much worse.

Focus is the key to paying off credit card debts

When the calendar rolls over to a new year, many Escondido residents set about making changes in their lives in accordance with New Year's "resolutions." For some people, the resolution will be to begin to tackle their credit card debt. This is oftentimes easier said than done, as many people are left without options to earn more income, or they are facing a debt situation that might simply be insurmountable. However, according to a recent article, those who are going to make an effort to pay down their credit card debt need to do one thing in particular: focus.

What does that mean? Well, according to the article, research has found that consumers who focus on paying off the debt on one credit card at a time were more successful at ultimately lower their debt liabilities. Many people have more than one credit card - and some will have revolving debt on more than one credit card, resulting in several different monthly credit card bills. If the research that was noted in the recent article is correct, consumers should pick one credit card to focus on at a time.

Don't let myths about bankruptcy derail your efforts

When Escondido residents get to the point where they are considering the possibility of filing for bankruptcy due to the state of their finances, they have probably exhausted all other options. In the lead-up to this point many people will attempt to make severe changes to their financial situations, such as cutting back on spending where they can and doing their best to pay more than the minimum payments on debts owed. However, for some people, even their best efforts won't be enough to get them out of a bad financial situation.

The good news is that bankruptcy is a tool for consumers to use when their debt burden has become overwhelming. The bad news, however, is that many people only know about the drawbacks to filing for bankruptcy, and some even believe the "myths" that have developing regarding filing for bankruptcy.

Chapter 7 bankruptcy for small businesses in Escondido

Many of our readers in Escondido probably associate Chapter 7 bankruptcy filings with individuals and families who are struggling with their finances. However, what some people may not know is that Chapter 7 bankruptcy can also be pursued by businesses that have come to the determination that the best option in a bad financial situation is to file for this so-called "liquidation" bankruptcy and shut down the company.

Similar to the Chapter 7 bankruptcy process for individuals, as soon as a company files a bankruptcy petition an automatic stay goes into effect regarding any collection activities by creditors. This means that those creditors will not be allowed to contact the business in an attempt to collect on debts owed.

Put an end to harassment with a personal bankruptcy filing

Escondido residents who are on the verge of filing for bankruptcy have a number of concerns, including what the filing will do to a credit score, what credit will be available in the future and whether or not filing for bankruptcy will actually put a stop to all of the harassment they have been facing from creditors over debts owed. The good news is that people who are in this type of financial position will likely find that there are more pros than cons when it comes to a personal bankruptcy filing.

For those who take the actual step of filing for personal bankruptcy protection, creditor harassment is supposed to stop immediately upon the action being filed. This means that creditors and credit collectors are prohibited from contacting and harassing a person who has filed for bankruptcy. Any garnishments that were in place will also be stopped.

What is the role of credit counseling in a personal bankruptcy?

Escondido residents who decide that filing for bankruptcy is the right move at the time due to their financial complications will likely have many different questions about the process. For some, the main concern is what assets they will be required to give up to satisfy the debts owed. For others, the main concern will be how they will move forward in a financially responsible manner once the personal bankruptcy process is complete. But, one thing that everyone who files for bankruptcy should know is the requirements that must be met to successfully complete the bankruptcy process. One requirement is credit counseling.

What is the role of credit counseling in a personal bankruptcy? Well, first and foremost it is important for Escondido residents to know that attending credit counseling before a bankruptcy filing is mandatory. This can give bankruptcy filers a better idea of how they arrived at a situation where their debt burden is overbearing, and it may provide an opportunity to discover a path forward that doesn't include a bankruptcy filing.

Two different approaches to credit card debt

In the coming weeks, many Escondido residents will be thinking the same thing: How will I pay off these credit card balances? After all, many people in California and throughout the country have been spending the last few weeks buying gifts for friends and family members as the holidays have been approaching. Then, January rolls around, along with the credit card statements. A recent article noted two different approaches to paying off credit card debt - one fast, and one slow.

The slow approach, as our readers can probably imagine, is to simply pay the minimum payments each month. The problem with this approach is that it can be incredibly slow. The recent article gave the example of a credit card statement with a balance of approximately $5,000. If the minimum payment of about $50 was paid each month until the balance was paid in full, it would take 19 years! And, the total amount that would actually be paid would be over $11,000.

Reaffirming a debt in Chapter 7 bankruptcy

In previous posts here, we have detailed how Chapter 7 bankruptcy is commonly known as "liquidation" bankruptcy - a process by which a debtor files a list of assets and debts with the bankruptcy court, and then the bankruptcy trustee sells off the assets in order to satisfy as much outstanding debt as possible. Other posts have covered the difference between secured and unsecured debt as well - secured debt being those debts that are tied to a possession, like a car loan, and unsecured debt most commonly represented by credit card debt. However, what some of our readers may have never learned about is the fact that some secured debts can be "reaffirmed" by the debtor in a personal bankruptcy.

What does it mean to "reaffirm" a debt? Well, essentially it is an agreement between a debtor and a creditor for the debtor to retain ownership of some item of property that is tied to a secured debt, usually an automobile. So, if the debtor wants to keep the vehicle, despite the fact that it might otherwise be seized in the bankruptcy process, the debtor and creditor might come to an agreement that allows the debtor to keep the vehicle and agree to pay most or all of the outstanding debt.

Bankruptcy filings decrease, but California leads the nation

Some of our readers in Escondido may have seen a recent article that detailed how the number of overall bankruptcy filings throughout the country dropped in November of this year. The figures were 7 percent lower when compared with November of last year. In all, there was a total of over 59,000 bankruptcy filings in America last month. While that figure may seem quite high, it was actually even less than the number of bankruptcy filings in the previous month. In October of this year there were over 63,000 bankruptcy filings.

In looking at the number of bankruptcy filings throughout the year of 2016 so far, it should be no surprise that California, as the nation's most populous state, leads the way. Through November of this year, over 66,600 bankruptcy actions have been filed in California, according to the recent article. This figure includes all types of bankruptcy filings, including Chapter 7, 11 and 13 bankruptcy filings.

Knowing what assets you can keep when filing for bankruptcy

One of the biggest myths that many people associate with filing for bankruptcy is that the process will strip filers of all of their possessions. Simply put, that isn't true. Most people who file for Chapter 7 bankruptcy - commonly known as "liquidation" bankruptcy - will actually get to keep most of their possessions. Our readers may be thinking, how is this possible? The answer - bankruptcy exemptions.

When Escondido residents file for bankruptcy, they must provide a list of all of their assets to the bankruptcy court, as well as a list of all debts owed. In Chapter 7 bankruptcy, the bankruptcy trustee then proceeds to liquidate the filer's assets and use the funds garnered from the sale of those assets to pay back debts owed. But, the law provides that filers are entitled to bankruptcy exemptions to protect certain assets.