Bankruptcy questions

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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miamivice
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Bankruptcy questions

Post by miamivice » Sun Jan 21, 2018 10:03 am

A friend of mine is looking at filing for bankruptcy, due to medical bills and employer instability. She is worried about three things: Her kids bank accounts, college savings, and her retirement.

I'm not sure off hand what happens to children's college savings. I don't think the money is in a 529. Probably just a bank account (maybe a separate one) and my friend hasn't said how much.

What happens to those things during a bankruptcy proceeding?

furwut
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Re: Bankruptcy questions

Post by furwut » Sun Jan 21, 2018 10:09 am

Retirement accounts are exempted. Kids are not responsible for their parents debts - so if the bank accounts are in their name they should be okay as well.

What if the bank accounts are held jointly?

miamivice
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Re: Bankruptcy questions

Post by miamivice » Sun Jan 21, 2018 10:10 am

The kids are under 18, so I assume they are custodial accounts.

rooms222
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Re: Bankruptcy questions

Post by rooms222 » Sun Jan 21, 2018 6:35 pm

If the reason the money is in the funds was actually a pattern of saving for the children's College, it should be all right. The account should be discussed with bankruptcy attorney.

http://www.fremont-bankruptcy-attorney. ... ankruptcy/

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badbreath
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Re: Bankruptcy questions

Post by badbreath » Sun Jan 21, 2018 7:26 pm

She cant work out a discount on medical bill and a payment plan to avoid bankruptcy.

I would literally tell the medical bill folks if you can not work out some plan and discount I am going for bankruptcy and you will get nothing. It should motivate them to take action.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

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willthrill81
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Re: Bankruptcy questions

Post by willthrill81 » Sun Jan 21, 2018 7:46 pm

badbreath wrote:
Sun Jan 21, 2018 7:26 pm
She cant work out a discount on medical bill and a payment plan to avoid bankruptcy.

I would literally tell the medical bill folks if you can not work out some plan and discount I am going for bankruptcy and you will get nothing. It should motivate them to take action.
+1

I know people who did just that. Collections agencies for medical bills know that they're only likely to get pennies on the dollar, on average, so someone being totally upfront with them and genuinely trying to pay should be able to work out some kind of payment plan.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Murgatroyd
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Re: Bankruptcy questions

Post by Murgatroyd » Sun Jan 21, 2018 8:29 pm

I am sorry about your friends situation. We filed in 2009 due to the recession crushing our business. I believe each state has different rules. In our case - Texas, which isn't the consumer friendliest, we kept IRA's and kids accounts were untouched. Have them check with a lawyer. All the best....

Katietsu
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Re: Bankruptcy questions

Post by Katietsu » Sun Jan 21, 2018 9:01 pm

Has she tried a non profit credit counseling group. Here is some information on where to start:
https://www.consumer.ftc.gov/articles/0 ... -counselor

The good ones will be able to give an objective assessment of the situation instead of a perspective likely affected by emotion.

hirlaw
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Re: Bankruptcy questions

Post by hirlaw » Sun Jan 21, 2018 10:30 pm

As someone who has practiced bankruptcy law for many years, the only advise I can give on a forum such as this is to advise your friend to consult with a competent attorney who specializes in consumer bankruptcy law. Many attorneys will offer a free or very inexpensive initial consultation. The attorney will go over all of her assets and liabilities and discuss the pros and cons of a bankruptcy (which may or may not be in her best interest to file), the different types of bankruptcy and the timing of any possible bankruptcy filing.

OldLearner
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Re: Bankruptcy questions

Post by OldLearner » Sun Jan 21, 2018 11:23 pm

badbreath wrote:
Sun Jan 21, 2018 7:26 pm
She cant work out a discount on medical bill and a payment plan to avoid bankruptcy.

I would literally tell the medical bill folks if you can not work out some plan and discount I am going for bankruptcy and you will get nothing. It should motivate them to take action.
+1

Definitely worth a try. Had an older pro bono client years ago with no money but felt obligated to pay her bills. After we provided the hospital financial information, they agreed to a no-interest $1/month payment on a five-digit bill.

Valuethinker
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Re: Bankruptcy questions

Post by Valuethinker » Mon Jan 22, 2018 10:23 am

OldLearner wrote:
Sun Jan 21, 2018 11:23 pm
badbreath wrote:
Sun Jan 21, 2018 7:26 pm
She cant work out a discount on medical bill and a payment plan to avoid bankruptcy.

I would literally tell the medical bill folks if you can not work out some plan and discount I am going for bankruptcy and you will get nothing. It should motivate them to take action.
+1

Definitely worth a try. Had an older pro bono client years ago with no money but felt obligated to pay her bills. After we provided the hospital financial information, they agreed to a no-interest $1/month payment on a five-digit bill.
My understanding with the US healthcare system is that providers charge vastly higher rates to individual patients, outside of insurance, than to insured patients.

Some of that is no doubt the higher risk of default. But it also provides a justification, a moral justification if you will, for negotiating for a lower fee with the provider. They are using price discrimination (in an economic sense ie charging different types of customers a different price for the same service) to exploit different willingness and ability to pay, and the greater negotiating power that insurance companies have.

Since one did not enter into the use of their services expecting to be unable to pay them, one has a degree of justification in negotiating with them if one cannot pay.

Valuethinker
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Re: Bankruptcy questions

Post by Valuethinker » Mon Jan 22, 2018 10:24 am

willthrill81 wrote:
Sun Jan 21, 2018 7:46 pm
badbreath wrote:
Sun Jan 21, 2018 7:26 pm
She cant work out a discount on medical bill and a payment plan to avoid bankruptcy.

I would literally tell the medical bill folks if you can not work out some plan and discount I am going for bankruptcy and you will get nothing. It should motivate them to take action.
+1

I know people who did just that. Collections agencies for medical bills know that they're only likely to get pennies on the dollar, on average, so someone being totally upfront with them and genuinely trying to pay should be able to work out some kind of payment plan.
In emotionally stressful situations like this, it really helps to have an attorney or other individual working for your side (as long as incentives are aligned, i.e. they cannot exploit you in that relationship). Negotiation is very hard if there is too much personal at stake.

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dm200
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Re: Bankruptcy questions

Post by dm200 » Mon Jan 22, 2018 10:36 am

hirlaw wrote:
Sun Jan 21, 2018 10:30 pm
As someone who has practiced bankruptcy law for many years, the only advise I can give on a forum such as this is to advise your friend to consult with a competent attorney who specializes in consumer bankruptcy law. Many attorneys will offer a free or very inexpensive initial consultation. The attorney will go over all of her assets and liabilities and discuss the pros and cons of a bankruptcy (which may or may not be in her best interest to file), the different types of bankruptcy and the timing of any possible bankruptcy filing.
I agree.

Nate79
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Re: Bankruptcy questions

Post by Nate79 » Mon Jan 22, 2018 11:08 am

Your friend needs Dave Ramsey.

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bottlecap
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Re: Bankruptcy questions

Post by bottlecap » Mon Jan 22, 2018 11:40 am

Echoing others, your friend needs to consult a bankruptcy attorney.

In addition to none of us being knowledgeable about her situation, many of us aren't knowledgeable about bankruptcy. I have practiced it in the past, and even I couldn't hope to give your friend advice that she could count on.

There is also the little problem of you friend not telling you everything that she might tell a lawyer (for example, her income, or the amount of credit card and other consumer debt she has).

It's hard to be forced into bankruptcy by medical bills because so many medical providers are willing to work with you to get something, rather than see you file bankruptcy. I'm not saying it's impossible, but because of this, I'm tempted to think that you may not have the same story your friend would provide an attorney.

Good luck,

JT

Jack FFR1846
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Re: Bankruptcy questions

Post by Jack FFR1846 » Mon Jan 22, 2018 11:46 am

Nate79 wrote:
Mon Jan 22, 2018 11:08 am
Your friend needs Dave Ramsey.
I'm honestly curious. How could Dave Ramsey help?
Bogle: Smart Beta is stupid

Nate79
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Re: Bankruptcy questions

Post by Nate79 » Mon Jan 22, 2018 12:27 pm

Jack FFR1846 wrote:
Mon Jan 22, 2018 11:46 am
Nate79 wrote:
Mon Jan 22, 2018 11:08 am
Your friend needs Dave Ramsey.
I'm honestly curious. How could Dave Ramsey help?
The story like the OP is almost a daily call in to the Dave Ramsey show. He will walk them thru how to get out of debt, the various steps to take and guide whether or not bankruptcy is advisable or not. Bankruptcy is like dropping a nuclear bomb, something of last resort. Some people are uninformed and think it is a magic wand. The other issue is that fixing the current debt doesn't always solve the underlying issue - the long term personal finance issue needs to be addressed so they don't wind up right back in the same place down the road.

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