Divorce, illness and medical bills, and car accident account for the majority of the reasons people come to my office asking about bankruptcy. I call these the big three of bankruptcy. Each is an upheaval in life for which no one budgets. If you listen to your congressman, or the talking heads on the radio you would suspect that the line of people outside my office for bankruptcy are there because they ran up huge credit card debt and are deadbeats trying to avoid that responsibility. That is exactly how they want you to feel. Is that unfair?
Following are three actual case studies of clients with divorce, medical bills, and accident who need to file bankruptcy.
Tell a young divorced mother she is a deadbeat. You know her. She’s the one whose husband left for a girlfriend. He filed the divorce. He got the house. All she got were the kids, her old car, and a piece of her husband’s retirement account. She did it all right. She obeyed every line of the divorce order. To minimize her monthly expenses she cashed out the retirement to pay off her car.
Her husband has done nothing. Just ignored her, the kids and the divorce court order. Didn’t refinance the joint car loan, or the mortgage. Now she’s being sued for the unpaid car loan, and a foreclosure on the house. She needs a bankruptcy. Desperately.
She’s sitting in my office sobbing. She is sobbing because she found out that if she files a bankruptcy she will lose the car. Without a loan on it her creditors are entitled to the nonexempt equity. Won’t they understand she needs this for her kids and to keep her job? She can’t afford a judgment or a garnishment either. Another deadbeat trying to beat her debts.
There would be no problem had she kept the funds in the QDRO retirement account, and came to me owning a vehicle with a car loan. She could have kept both despite having a divorce and fling bankruptcy.
- Medical Bills and Bankruptcy
No one wants to be sick. Do you? What about the man with diabetes? He has insurance. The co pay balances are eating him alive. The doctors and hospitals got 80%. He has nothing more he can pay. He is losing his sight. The bill collectors won’t stop calling him. The only choice left to handle his medical bills is bankruptcy. He doesn’t want to take this step, but what else is left? The stress makes his condition worse. Another deadbeat?
- Car Accident and Bankruptcy
If you don’t make enough money to make ends meet each month where can you cut expenses? You can cut your food only so far. You still have to eat. Car insurance is just a luxury. You can’t afford that anymore. Just being careful will have to be enough. Often that won’t work.
Ever hear of a chain reaction? Ever see one? You did nothing wrong. Your car got pushed into the one in front. That guy and everyone ahead of him sue you. No car insurance. Even with the state minimum coverage it won’t be enough. Without insurance you can’t pay defense costs. Forget paying the judgment. Without car insurance a judgment results in a driving suspension.
Where can you turn? If you have a car accident, the claim can be discharged in a bankruptcy. If you were driving drunk, then the property damage accident claim can be discharged in bankruptcy. Does choosing to feed your family make you a deadbeat if you don’t have enough money for car insurance?
The simple fact is that many regular people face divorce, medical bills, and uninsured car accident. Often the best way to bounce back from these curves life throws is to file bankruptcy.
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