Many people facing financial difficulties see bankruptcy as a worst-case scenario where all of their possessions will be taken away. However, bankruptcy is not about what you lose, it is about all the things you get to keep. People with large amounts of debt face consequences that include foreclosure, seizure of personal property and wage garnishments. By not filing for bankruptcy, some of these people are risking their homes and other possessions of great importance. Let us explain what we mean by illustrating with a hypothetical scenario.
Unexpected Medical Emergency Lands Couple in Debt Spiral
John and Mary are a married couple with a combined household income of $65,000 a year. John works in a law office mailroom and Mary teaches history classes at a local high school. One day while driving home from work in rainy weather, John’s car hydroplanes and slams into a lane divider. Upon waking up in the hospital, John has several fractured ribs, a concussion and his leg is broken in three places. Six days later, John and Mary leave the hospital. Unfortunately, the paramedics brought John to an out-of-network hospital after his accident, whereby the couple incurred tens of thousands of dollars in medical bills.
After the hospital, John still needs to take more time off work to heal, but will not get paid. With a mortgage, student loans and car bills quickly approaching, John and Mary are in serious trouble. It does not take long before they fall behind on payments and the bank threatens to foreclose on the house. John and Mary have been making payments on the $31,000 in medical bills, but the monthly bills are excessive and the hospital has refused to negotiate.
The situation John and Mary have found themselves in is common. An unexpected expense jeopardized payments for other debt obligations, throwing their financial lives off balance. Fortunately, John and Mary have options if they want to keep their house and cars. It was always their intention to pay the medical debts back, but they were unable to secure lower monthly payments.
Can Chapter 13 Bankruptcy Save John and Mary?
Chapter 13 bankruptcy would be an ideal solution for this couple. John and Mary have a mortgage and two cars they rely on as transportation to get to their jobs. By filing for Chapter 13 bankruptcy, these assets will not be liquidated. Chapter 13 will also allow the couple to organize a more accommodating payment plan that does not jeopardize other debt obligations. In a way, Chapter 13 bankruptcy saved their home, cars, and kept them from defaulting on student loans.
Bankruptcy can be described as a means for protecting your most precious possessions. There are numerous examples that show bankruptcy is not the “end of the world” as far as finances go, in fact it is quite the opposite. Bankruptcy is a second chance at life, a clean slate to start over again while retaining your most important assets.
The Sader Law Firm – Kansas City Bankruptcy Attorneys