Questions for our American friends

[palo5]

Originally Posted by deepsepia

... There are only a few kinds of debt that can't be reduced in bankruptcy, and most of them are related to some legal penalty (eg unpaid taxes). Student loans are one of the very few obligations people enter into in the normal course of affairs, which they will be unable to reduce in bankruptcy...

We hear that credit card debt can't be fixed by bankruptcy either. GWB made it so

Is that true?

[9876543210]

palo5,

Originally Posted by palo5

If what I've heard is true, you don't get just one invoice, but one from the hospital, one from the surgeon, one from the anesthetist etc etc

You are correct. Some people actually equate the paperwork you get after a major medical problem to a blizzard. There's the first wave of paperwork in the month after the surgery but it continues every month until its either payed off or you go bankrupt.

I hope our US friends will correct me if this is wrong, but it's said to be a very bureaucratic process, and it's no better if you do have insurance

I was reading an econ blog earlier today and learned something I hadn't heard before - apparently, even if you are insured, and even if you're on medicare, they have a component called "co-pay" and it was defined as typically 80/20, meaning the insurance pays 80% and you pay 20%. And that's not all, because you have to pay for medication as well as treatment

If that's true, it's easier to understand an obsession with money

Yes, thats true. The 80-20 split seems to be rather standard nowadays. But here's something to think about.

As described elsewhere, the split isn't that big of a deal as long as the bills are routine and small. For most people they're fairly easily taken care of. But what happens if its not routine and small? Lets say you have a heart problem, cancer or any number of serious medical problems that people have. Any of these can easily result in final bills of $200,000 or more. Easily!

So you get back from the hospital and know you won't be returning to work for at least six to eight months (if then). You're lucky and your employer decides to keep you. The final bills roll in and they total $200,000. You're 20% split will be at least $40,000. Lets say you're middle class and $40,000 is what you make annually. How are you going to pay that off? You still have a mortgage, car payment or two, kids, etc. etc.

One of these days, hopefully, people will finally get what potentially can happen to them. We get this changed or the medical and finance industries are going to completely own this country.

[9876543210]

palo5,

Originally Posted by palo5

We hear that credit card debt can't be fixed by bankruptcy either. GWB made it so

Is that true?

Nope, thats false. Credit card debt can be cancelled in bankruptcy. Its what is called "unsecured" while a car loan or mortgage are usually "secured" and harder to get rid of (but even those can be eliminated). How that works I'm not sure but I know its possible.

[9876543210]

blueballsdc,

Originally Posted by blueballsdc

The whole system is screwed up and honestly I don't know if Obamacare is really going to fix anything. However, I do support Obamacare.

I haven't gotten really into the weeds of Obamacare but, from what I remember of the whole process of getting it done, I don't really think its going to do very much for the average person. They made too many concessions to the Republicans which were designed to gum up the whole thing. So I guess we'll start to see in a bit over a year but I'm pretty skeptical.

I guess I support it also but...... time will tell.

[blueballsdc]

Originally Posted by Rotzopop

But why do you call it "Obamacare"?
Its a little irritating, because this sounds like you don`t like the idea.

I call it Obamacare because it is a convenient label. It is what most everybody has called the healthcare package submitted by President Obama and signed by him into law. It is a lot easier to say than Patient Protection and Affordable Care Act (PPACA)

I do fully support some form of national healthcare be it a European or Canadian type system of what is being instituted under the PPACA. I think that it is unconscionable that a country as wealthy and powerful as the USA can't provide decent healthcare for its citizens.

That makes me a socialist in some people's eyes. I also support a strong military, the right to own firearms, and the death penalty which makes me a fascist in other people's eyes. I'm also a practicing capitalist and atheist and when put together with my other traits tends to leave everybody confused.

[9876543210]

Rotzopop,

Originally Posted by Rotzopop

But why do you call it "Obamacare"?
Its a little irritating, because this sounds like you don`t like the idea.

Just to add a bit to what blueballsdc just said, I think it was the Republicans that started calling it "Obamacare" in an attempt to put a derogatory connotation to it. But that changed sometime during the recent campaign when Obama himself said something to the effect that he was happy it was called "Obamacare" if it did some good. And since then everybody uses "Obamacare". The Republicans probably aren't real happy about that though.

[deepsepia]

Originally Posted by palo5

We hear that credit card debt can't be fixed by bankruptcy either. GWB made it so

Is that true?

Not exactly. Credit card debt, like all consumer debt, can be modified by a judge in a Chapter 7 bankruptcy. What happened with the 2005 "Bankruptcy Abuse Prevention and Consumer Protection Act" was that it became harder to file a Chapter 7, "clean start" bankruptcty, and there some new restrictions on the type and amount of credit card debt that can be discharged.

You can still do it, if you qualify, but access to this is more restricted now. There are specific kinds of debt incurred with a credit card which will be presumed "non-dischargable", luxury goods, high amounts -- eg you purchase gold jewelry on your credit card and then file for bankruptcy, don't expect the judge to write down that part of your credit card debt.

http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act

[winebeavis]

Originally Posted by 9876543210

How that works I'm not sure but I know its possible.

Okay. A whole lot of not 100% accurate information just went down since my last post.

A few things. Educational loans are sometimes dischargeable. There's a plethora of factors. It's not easy to do though and most of the time the debtor is unable to qualify for a discharge. I've done it once since the new rules went into effect. That was a special case.

The rules for filing a straight chapter 7 bankruptcy (no repayment or reorganization) did change radically in October 2005. It is harder to qualify for a chapter 7 than it used to be.

Discharging secured debt is not a problem. Never has been. There are three types of debt each listed on the schedules D, E, and F. There are priority debts. These are treated very differently. The most common is a domestic support obligation such as child support. Most criminal fines, etc. Most IRS taxes under most circumstance (not absolute).

Then there are unsecured non-priority debts. This is where credit cards, medical bills, other loan --educational loans, and everything else comes in. There is no perfected security tied to the debt (i.e. collateral). What's a perfected security interest is left up to state law.

Then there are secured debts. These have collateral and the lien has been perfected in one of the permissible ways under the local version of U.C.C. 9. when filing the bankruptcy, one must declare what they intend to do with the secured property (in ch. 7 you file a "Statement of Intention"). A debtor usually has two choices A) reaffirm the debt and keep paying for the collateral; or B) surrender it. There is no penalty for surrendering it. In Chapter 13, you must pay any arrears through the plan and frequently it makes sense to place the value (if subject to the cramdown) into the plan. However, sometimes something happens where the collateral vanishes. Say an air conditioning unit gets stolen or a car is smashed. When the collateral is gone, that debt becomes unsecured, whether the creditor likes it or not.

There are also various legal objections to discharging a particular debt or all debts that a creditor can bring. However, you better be really sure you have all your ducks in row before doing it. An adversary proceeding can be brought to determine the dischargebility of certain debts. The creditor will most likely have to pay the other side's fees for guessing wrong in this matter.

Another note about educational loans. even though these are unsecured under the bankruptcy code, these act as priority debts --even though they're not, and they are not typically discharged. But the history of discharge or not has changed dramatically over the years and we're frankly, still sorting some of it out. Some are depending if they are grandfathered under older rules, based on the type of loan.

A bizarre legal turnabout in my state has been a constitutional rule that the state government needs a judgment or other court order in order to garnish. The state is also one of the biggest guarantors of private student loans. When a debtor defaults on the student loan it gets paid by the guarantor who seeks collection. The attorney general has an entire division set up just to prosecute the defaults and take judgment. However, the Federal Circuit Court of Appeals has ruled that once the state obtains a judgment, that judgment is simply a money judgment as any other. It than can be discharged in bankruptcy. Still waiting to see what the legislature does next.

[Nobody1]

Very useful information winebeavis. Thanks man.

[9876543210]

winebeavis,

Originally Posted by winebeavis

Educational loans are sometimes dischargeable. There's a plethora of factors. It's not easy to do though and most of the time the debtor is unable to qualify for a discharge. I've done it once since the new rules went into effect. That was a special case.

Well thats interesting. My gf just went through Chapter 13 and was told she couldn't get rid of her student loans (by her attorney). So any links you could provide showing how this could be done would be greatly appreciated. She's already had her meeting with her creditors (nobody, and I mean nobody, showed up to protect any of their claims). So all were discharged. All she has remaining are a small car payment, her attorney fees and the mortgage (and what a mess that is).