Seeking a Second Chance
For some who struggle to keep up with medical bills, declaring bankruptcy can provide relief — and the process is fairly simple.
By Rilind Elezaj
Did you ever need a do-over?
If you’re experiencing a financial collapse and need to start over — as is the case for many who are grappling with cancer — declaring bankruptcy could be the answer.
Bankruptcy is a court proceeding in which the judge and other trustees study your assets and liabilities to assess whether you are able to pay your bills. The goal is to determine whether you should be allowed to let go of your debt. Bankruptcy laws were created to give people a second chance when they are experiencing hard financial times due to bad luck. The good news is that most people who file for bankruptcy end up getting it.
Who Can Declare Bankruptcy?
In general, people eligible to declare bankruptcy carry debts that can never be cleared with the money they possess now or expect to earn in the near future. This can include individuals having trouble settling their medical bills, such as patients with cancer who require immediate treatment that ends up continuing for a prolonged period — possibly a lifetime. These patients are typically paying for medical treatment while also trying to fulfill the financial obligations they had before they got sick: mortgages, student or auto loans and credit card debt.
A 2013 study found that people with cancer are 2 ½ times more likely than those without cancer to declare bankruptcy.
Types of Bankruptcy
Patients and owners can consider declaring either one of two types of bankruptcy: Chapter 7 or chapter 13.
In chapter 7 bankruptcy, patients sell certain property such as any equity they have in their homes and vehicle, as well as clothing, household appliances, and wedding jewellery and use it to pay all or part of their debt, which is then considered satisfied.
However, a lot of property is exempt and can be kept by those who are filing. A business owned by a debtor may not be touched by creditors, even if it was used as collateral because bankruptcy law is about helping debtors with their debt and putting them back on their feet. Bankruptcy law recognizes that not everything should be taken from them because it doesn’t benefit any side. Non-exempt property generally covers items outside of the necessities for living and working. So it’s reasonable for the creditor to let you keep the business in order to pay off your debts using the income you earn. In a chapter 13 bankruptcy, you propose a repayment plan where you repay part or all of the debt over three to five years. In addition, necessities including a patient’s car, home, clothing, furniture, work equipment, appliances, wages and retirement savings tend to be exempt.
The Pros and Cons
Bankruptcy can provide patients with peace of mind. Their bills will be considered settled, and lenders will no longer contact them to request payment. In fact, creditors are required to stop contacting debtors the minute they petition the court for bankruptcy relief.
Other benefits are that there is no minimum amount of debt needed in order to file; one spouse can file alone if the other doesn’t want or need to; and the process is fairly anonymous — odds are, no one will realize that you’ve filed unless you tell them.
In addition to the fact that filing for bankruptcy takes some work — hiring and meeting with an attorney, filling out paperwork and going to court — another drawback is that some assets may be lost. Too, the spending and borrowing power of people who have filed for bankruptcy may be restricted, with evidence of their bankruptcy showing up on their credit reports for 10 years. Still, these folks will retain the ability to secure and use new credit cards.
Important to note is that people with ongoing medical problems may accumulate new debt after successfully filing for bankruptcy. Another filing will not be allowed for years, but patients who are protected under chapter 13 bankruptcy may petition the court to add some of their new debt to their existing plans, protecting them against having to pay. A legal remedy of a bankruptcy for medical bills is debt discharge. Most people who file for Chapter 7 will have the right to discharge most or all of their debts. The amount of medical debt which can be discharged in Chapter 7 bankruptcy is not specified.
This issue is not only stressful for the bankrupt’s but also for hospitals and physicians who are dealing with these cases and they might cause a medical malpractice stress.
How to File for Bankruptcy
Those who want to file for bankruptcy will first need to come up with a complete financial record that includes their expenses, income, debts, and assets. They will also need to consult with a credit counseling agent who has been approved to guide them. The court requires people considering bankruptcy to do this within 180 days of filing to help determine whether they have exhausted all their financial resources.
To find a credit counseling agency approved by the U.S Trustee’s office in your area, visit justice.gov/ust, click “Consumer Information” and then click “Credit Counseling & Debtor Education.”
It’s possible, though, that you can avoid that step and achieve one-stop shopping by selecting your bankruptcy attorney before you do anything else. Your attorney can most likely give you financial record forms that will spell out what you need to include, and may also be able to recommend a credit counseling agency.
The good news is that, wherever you are, you should always be able to find a qualified lawyer in this niche who can simplify the filing process for you.
For patients with cancer, there may be opportunities to get this legal help at a discount or for free.
One resource for finding that help is the National Cancer Legal Services Network, at nclsn.org. In addition, Know Cancer, an online community that provides social and professional support to people affected by the disease, offers information about free or discounted legal help online at knowcancer.com/cancer-lawyers. Your local bar association may offer you a short, discounted discussion with a lawyer, and many communities or countries have legal aid societies that can offer help to those without a lot of financial resources. Lawhelp.org also may direct you to free or discounted legal advice.
In many cases, private local law firms will also be willing to offer you their services at a discounted rate — or even for free.
Legal Aid Legal aid provides people who can’t afford a legal representation and give them permission to access the court system. Private companies of lawyers also provide legal aid for individuals. Patients can approach a Law Centre if one exists in their area or contact their local Citizens Advice Centre. There are also a lot of organizations and firms that provide them with necessary information about Legal Aid.
Having a solid policy and process in place for regular debt collection will keep bankruptcy filings from having a major impact on your practice. However, when bankruptcy does occur and you receive notice of filing, all collection attempts on bills prior to the filing date must stop. Informing your collection agency of the notice is the next step for patients already in collections.
It’s important for you to rebuild your credit score after bankruptcy, of course, it’s never a good idea to make a hasty decision to file for business bankruptcy—it will stay on your credit history for 7-10 years. Be sure to explore all your options before settling on what to do with your business in the near future. Best thing to do after dealing with bankruptcy is to rebuild your credit score. One of the best ways to do this is with a secured credit card. This is where you go to a local bank or credit union and give it some amount of money to hold.
About the Author
Rilind Elezaj is an experienced a Digital Marketing Specialist with a demonstrated history of working in the marketing and advertising industry. Rilind possesses a strong entrepreneurial mindset and has devoted his career to enhancing the sphere of digital marketing. In his methodological approach, Rilind integrates web development and other digital marketing solutions to create hybrid strategies that bring the best results.