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Redwood City California Bankruptcy Law Blog

Filing for bankruptcy

When the financial crisis was at its peak, almost 1.6 million people in California and the rest of the United States filed for bankruptcy. Almost one decade later, the number of filings is less than 800,000. However, the difference in the number of filings is not an indication of economic health by itself.

Filing for bankruptcy can be very expensive, as attorneys can charge up to $1,000 to file a Chapter 7 bankruptcy. Also, it is challenging to use bankruptcy to discharge student loans. Still, many people can use the bankruptcy process to give themselves a clean financial slate.

Mounting a defense in a debt collection lawsuit

California residents who are struggling to cope financially will likely know that debt collection companies can be extremely aggressive. A study conducted by the Consumer Financial Protection Bureau revealed that one in four of the 70 million Americans who have had dealings with debt collectors felt threatened. It is often the possibility of legal action that causes the most concern. However, there are several things that consumers can do if they are sued over an unpaid bill.

One of the biggest mistakes consumers make is not responding to a debt collection lawsuit. Failing to show up in court will result in a default judgment, which could lead to additional fees and legal costs. Creditors with judgments in hand may then pursue even more aggressive tactics such as wage garnishments and asset seizures. Instead, consumers should demand that creditors prove that the debt is legitimate as this can be difficult to do if it has been sold.

Most people have multiple credit cards

According to a survey from The Ascent, 10% of respondents said that they had six or more credit cards. While having multiple credit cards can pose problems for California residents, there can also be benefits to having multiple cards. One of the key benefits is the ability to quickly raise a credit score as an individual will make multiple payments over a short period of time.

The more cards that a person has, the more credit that an individual has to use. Ideally, a person will use no more than 30% of a given credit line and no more than 30% of the total credit line across all open accounts. Having multiple cards can make it easier to handle a financial emergency even when an individual doesn't have any money in the bank. A final benefit is the ability to get more cash back or rack up other rewards faster.

Is California headed for economic collapse?

Whether you live in San Jose, Redwood City or another California location, you can likely relate to a fluctuating economy that has an impact on your personal finances. Depending on the unique circumstances of your lifestyle, such as whether you're married, have children, are employed, etc., you may have already overcome some economic challenges. It doesn't take much for finances to get thrown off-track.

In fact, some analysts say that the entire state of California is economically unstable. If the state is unsustainable, it could definitely have a trickle-down effect on your personal financial situation. For instance, if the job market crashes, you might wind up unemployed and unable to pay your mortgage. It's always a good idea to stay updated on state economy issues and know what types of debt relief options are available if a personal financial crisis hits.

Student loan debt leading to more bankruptcy filings

Student loan debt is increasingly driving people in California to file for bankruptcy. According to a study conducted by LendEDU, 32 percent of people who file for bankruptcy under Chapter 7 have student loan debt. Among those who file for Chapter 7 bankruptcy and carry student loan debt, that debt made up, on average, 49 percent of their total outstanding debt. LendEDU examined 1,083 bankruptcy cases in the study.

Generally speaking, student loan debts are not dischargeable in bankruptcy, but filing for Chapter 7 protection can get rid of other debts so people have money to make student loan payments. College tuition has more than doubled since the 80s, according to Business Insider, and Millennials have more than 300 percent more student debt than their parents had. On average, Baby Boomers had to work 306 minimum wage hours to pay off a four-year college education; Millennials have to work 4,459 hours.

Americans forced into bankruptcy by medical debt

While there are a number of reasons why California residents can face financial trouble, one stands out as the leading cause of personal bankruptcy in the United States. Medical debt is the most common reason cited for bankruptcy filings. A full two-thirds of all cases are linked to medical bills, with costly mortgages and consumer spending coming in as the next most common problems. While some may expect that health insurance will free people from serious medical debt, many of the people facing costly bills are already insured.

There are many factors that can contribute to costly medical debt. Expensive prescription drugs can be one serious concern, especially if the costs are not covered by insurance. In addition, people should do extensive research to understand their medical insurance policies, especially if they will require care for a serious condition. Being clear about policies on referrals and locating in-network doctors or even hospitals can save thousands of dollars and help people to avoid claim denials from their insurance companies.

Many of those struggling with medical debt have health insurance

Most of the people in California and around the country who file personal bankruptcies each year do so because of medical debt, and many of them found themselves overwhelmed by bills despite having health insurance. Common reasons for hospital and doctor bills not being covered include getting treatment from out-of-network providers and visiting a specialist without first getting a referral from an in-network physician. Health insurance companies usually have fierce cost-control measures in place, and they often look for ways to deny claims.

Inflated or inaccurate health care bills are another common cause of soaring medical debt. Diagnostic codes and other medical jargon can make these documents difficult to understand for consumers, but health insurance companies have experts to pore over them and identify overcharging and treatment that was not actually provided. Patients can file appeals when their claims are denied, but the process is complex and offers no guarantee of a successful outcome.

Determining whether Chapter 7 or Chapter 13 best fits your needs

Your credit card balance is out of hand. You have medical bills rolling in from the surgery your spouse had last year. Your boss informed you that the company is doing away with bonuses, which, in your case, amounts to a significant portion of income. One of your kids needs braces and you weren't able to make a mortgage payment the last two months.

One thing's for sure: You're definitely not alone in your struggle. Many California residents are facing similar financial crises. In fact, you'd be hard-pressed to find someone who hasn't had financial problems at some point in their lives. Bankruptcy has helped a lot of people restore financial stability. If you think immediate debt relief is for you, you'll want to learn more about Chapter 7 and Chapter 13 bankruptcy.

Bankruptcy can help with medical debts related to cancer

California residents and others who are diagnosed with cancer may incur significant debt in an effort to overcome their illnesses. However, it may be possible to reduce or eliminate that debt by declaring bankruptcy. Furthermore, individuals may get relief from creditor phone calls, letters and other collection activities when they file. This ban on collection activities may provide emotional relief on top of the financial relief that may be available.

Debt relief through bankruptcy might occur quickly by filing for Chapter 7 protection. In a Chapter 7 case, many different types of debts can be eliminated without necessarily having to give anything to creditors. Although it is referred to as a liquidation bankruptcy, it may be possible to keep most property. A Chapter 13 cases allows a person to reorganize debt and pay it off over a period of three or five years.

How to determine if a debt can be discharged

Consumers in California and throughout the country may be entitled to have some of their unsecured debts wiped out in bankruptcy. As a general rule, bankruptcy is available to honest debtors who are looking for a fresh start. However, there are many factors that a bankruptcy court may need to consider if debts were the result of fraud or similar activities. Specifically, debts may be not be discharged if they were accrued because of fraudulent conduct while acting as a fiduciary.

Furthermore, a judgment related to the willful injury to another person or another person's property generally cannot be discharged. In such a scenario, it would be necessary to show that a defendant intentionally took action that would have caused an injury. If punitive damages are awarded in a case, they could be discharged in a bankruptcy depending on the circumstances in that matter.