Which type of debt is the most crushing? (18 year old, how much, insurance)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
If anyone in the know wants to share how bankruptcy works/goes from beginning to end, I’d love to learn it. Fortunately I’ve never been in that situation.
If anyone in the know wants to share how bankruptcy works/goes from beginning to end, I’d love to learn it. Fortunately I’ve never been in that situation.
I am a bankruptcy lawyer. Do you want to know about personal or corporate? Straight liquidation v. personal or corporate or farmer or municipal reorganization?
I am a bankruptcy lawyer. Do you want to know about personal or corporate? Straight liquidation v. personal or corporate or farmer or municipal reorganization?
I'm just curious how it works for people, generally. I know it's a TV example, but in the show Big Little Lies, Laura Dern's character and husband, the husband loses all of their money and they go bankrupt. They go to a hearing, not court, where a trustee tells them not to value their homes/assets because "that's my job" and made them hand over their Rolexes and her ring. (Why wear expensive watch/jewelry to a bankruptcy hearing??) I know it's TV but I found it interesting.
But then I know people personally who went bankrupt at one point and they lost all their credit but not their home.
Say I own a 500k home and owe 300k and have decent equity. But I can't pay my CC bills (let's say 40k) and student loan bills (let's say 50k), and I bought too fancy a car and have some huge payment. I'm 90 days behind on everything, CCs want to sue me and take my equity. What happens? Could I get time to sell my house and use the equity to pay back everyone?
What if all that was the same and I was not a home owner? Ouch.
College debt is willful and can be avoided. Medical debt however is soul crushing. You followed all the rules. You went and got educated. You put money away for your retirement and kids college. You climbed the ladder and did as you were expected to. You worked hard and probably gave up evenings and weekends here and there to finish projects. Got the pretty wife, the big house, the picket fence, the dog and kids, ....
Then bang... one visit to a Dr for a small pain or a tbone in an intersection....
....it is all erased.
Savings wiped out. 401k's emptied. Sell the house. Possibly lose your job. Bills that come month after month after month....
I'm just curious how it works for people, generally. I know it's a TV example, but in the show Big Little Lies, Laura Dern's character and husband, the husband loses all of their money and they go bankrupt. They go to a hearing, not court, where a trustee tells them not to value their homes/assets because "that's my job" and made them hand over their Rolexes and her ring. (Why wear expensive watch/jewelry to a bankruptcy hearing??) I know it's TV but I found it interesting.
It is true that the (normally) initial hearing, called a "341 meeting" after the section of the Bankruptcy Code that mandates it, is that it occurs before a bankruptcy trustee if the Debtor (the person or entity filing the case) is in Chapter 7, 12 or 13, or the U.S. Trustee if it is a Chapter 9, 11 or 15 case. Back in, I believe, the 1970s or 1980s that a Debtor went to a 341 meeting with a Rolex and the Trustee relieved him of it. Technically the Trustee did the right thing since unless the state's law on exempt property had no cap on value, the Trustee now owned the Rolex. The Trustee probably told the Debtor that if turnover were made peacefully the fact that he had it wouldn't reflect as badly on the Debtor but if the Debtor refused to turn it over the court proceedings to get hold of it would be more than messy.
The Debtor doesn't literally lose everything. Most if not all states have a list of "exempt" property of varying degrees of generosity. There is a federal exemption schedule that states can "opt out" of, making federal exemptions unavailable. New York opted out in, I believe, 1982 or 1983 and then opted back in in a law signed by former governor Paterson his last day in office, December 31, 2010. In the same legislation, the "homestead" exemption for a house was raised to a schedule that varies by counties, but is moderately generous.
Quote:
Originally Posted by Mister 7
But then I know people personally who went bankrupt at one point and they lost all their credit but not their home.
Say I own a 500k home and owe 300k and have decent equity. But I can't pay my CC bills (let's say 40k) and student loan bills (let's say 50k), and I bought too fancy a car and have some huge payment. I'm 90 days behind on everything, CCs want to sue me and take my equity. What happens? Could I get time to sell my house and use the equity to pay back everyone?
What if all that was the same and I was not a home owner? Ouch.
In New York at least, the amount of equity would be low enough that he would hold on to about $170,000 in homestead equity, and double that if house is in both husband and wife names and both are filing. As a practical matter a Trustee will usually work out a payment if, as in that example, only the husband files, he owns the house and there is $30,000 in equity over the exempt amount. That is, of course, not legal advice.
The caveat is that the student loan bills will most likely not be discharged, so in that profile, I would likely have advised against a filing. In New York at least, the home equity would be protected without a bankruptcy filing. I rarely advise a personal filing. The Debtor has to wait eight years for another discharge in most cases and one can easily suffer another spill in life, such as a huge medical expense not covered by insurance or a business failure with personally guaranteed debts.
Even there a filing can be rough sledding. I represent an electrical or plumbing contractor who had to pay about $200,000 to the bankruptcy trustee to settle claims for transfers of property he allegedly made, and has still has two open major litigations over his discharge and the dischargeability of particular debts.
College debt is willful and can be avoided. Medical debt however is soul crushing. You followed all the rules. You went and got educated. You put money away for your retirement and kids college. You climbed the ladder and did as you were expected to. You worked hard and probably gave up evenings and weekends here and there to finish projects. Got the pretty wife, the big house, the picket fence, the dog and kids, ....
Then bang... one visit to a Dr for a small pain or a tbone in an intersection....
....it is all erased.
Savings wiped out. 401k's emptied. Sell the house. Possibly lose your job. Bills that come month after month after month....
It is soul crushing debt.
You don't think that theoretically this person would have health insurance?? College grad and good job, money, etc based on your description. For that matter, you don't have to be highly paid to access excellent insurance. The exact same excellent plan I have is offered to the basic hourly employees, minus an HSA. Mine has paid probably $350,000 this year after a rough back surgery and all the imaging and doctor visits. I've paid my 4k out of pocket max, now everything is 100% covered through the rest of the year. My doctor swears it's not necessary but I wanted a follow up MRI, insurance covered 100%.
Quote:
Originally Posted by jbgusa
It is true that the (normally) initial hearing, called a "341 meeting" after the section of the Bankruptcy Code that mandates it, is that it occurs before a bankruptcy trustee if the Debtor (the person or entity filing the case) is in Chapter 7, 12 or 13, or the U.S. Trustee if it is a Chapter 9, 11 or 15 case. Back in, I believe, the 1970s or 1980s that a Debtor went to a 341 meeting with a Rolex and the Trustee relieved him of it. Technically the Trustee did the right thing since unless the state's law on exempt property had no cap on value, the Trustee now owned the Rolex. The Trustee probably told the Debtor that if turnover were made peacefully the fact that he had it wouldn't reflect as badly on the Debtor but if the Debtor refused to turn it over the court proceedings to get hold of it would be more than messy.
.
Thank you for all this information! I understand better now.
You don't have to be highly paid to access excellent insurance. The exact same excellent plan I have is offered to the basic hourly employees, minus an HSA. Mine has paid probably $350,000 this year after a rough back surgery and all the imaging and doctor visits. I've paid my 4k out of pocket max, now everything is 100% covered through the rest of the year. My doctor swears it's not necessary but I wanted a follow up MRI, insurance covered 100%.
Try being self-employed, with a monthly premium of $700; plus out of pocket.
Ouch!
Even 20 years ago I filed chapter 7 over medical bills. Our broken and created in the 1940's healthcare system needs an enema.
You don't think that theoretically this person would have health insurance?? College grad and good job, money, etc based on your description. For that matter, you don't have to be highly paid to access excellent insurance. The exact same excellent plan I have is offered to the basic hourly employees, minus an HSA. Mine has paid probably $350,000 this year after a rough back surgery and all the imaging and doctor visits. I've paid my 4k out of pocket max, now everything is 100% covered through the rest of the year. My doctor swears it's not necessary but I wanted a follow up MRI, insurance covered 100%.
Thank you for all this information! I understand better now.
The vast majority of people who declare bankruptcy over medical debt DO have health insurance. If you get a serious illness the money can add up fast. I paid over $14,000 out of pocket before my back surgery. A diagnosis like cancer can wipe you out totally. I worked with a woman who had breast cancer She had health insurance AND a cancer rider and still owed tens of thousands.
Most people do not have access to excellent insurance. My employer is small and the insurance company has horrible reviews online. I pay $700 a month for my own blue cross policy that I've had for years, and that's who I had when I paid the $14,000 out of pocket. And the surgery was denied at first, with them saying the material my surgeon uses instead of fusion was "experimental" despite his using it for over 10 years. I was out of work 2 months longer because of that, 10 months altogether, during which time I used my emergency savings, my Roth and took on credit card debt just to survive and pay my $50 a pop co-pays for therapy 3x/week and all the doctor visits, plus Ubers to get there and back because I couldn't drive at that point.
Your post sounds like very "Let Them Eat Cake" in assuming because you have access to excellent insurance, everyone does.
The difference between Student Loan debt and pretty much every other form of debt is that student loan debt, except in very, very rare circumstances, can not be discharged in bankruptcy.
Medical debt is up there too, since it's a form of debt that most people don't choose to take on. Medical debt is also the #1 cause of bankruptcy in the United States.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
