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The Number One Reason People Declare Bankruptcy

Every year, over 1.5 million bankruptcies are filed.  About 97% of them are filed by individuals.  Bankruptcy is an extremely important tool and can be life-changing if used correctly.  People who file for bankruptcy are normal, everyday citizens usually over age 45.  They are married with families and plans for their lives.  Sometimes things happen that are beyond our control. Amongst these things are medical problems.

Bankruptcies Related to Medical Expenses

This may or may not surprise you, but medical expenses are the number one cause of bankruptcy in the United States. Here are some quick facts:

  • 4 out of 5 people that declare bankruptcy because of medical bills have health insurance.
  • 1 in 10 adult Americans delay medical care because they cannot afford it.
  • Just under 10% of adults struggling to pay their medical bills have declared bankruptcy.
  • Roughly half of all collections accounts on American’s credit reports are medical bills.

Clearly, medical bills are a problem for millions of Americans every year.  What can you do to avoid overwhelming medical expenses?

Tips to Avoid a Pile Up of Medical Bills

Healthcare expenses are tough to deal with and there is no getting around that.  However, there are ways to protect yourself from an insurmountable situation.

  • Talk to the billing department of the provider. They may be able to offer insight on private insurance, public coverage, and charities available to you.
  • Take a very close look at your bills. Billing and coding errors happen all the time.  Disputing a bill is a perfectly valid practice.  Healthcare is a product just like anything else.
  • Consider using a credit card to pay your medical bills. While you should still be sure to pay at least the minimum balance every month, you may be able to buy yourself some time.

What Can You Do If You Have Unmanageable Medical Bills?

Opening that envelope when you know a nasty medical bill inside is never fun, but before you pay it there are some things you can try.

  • Talk to the billing department and negotiate your bill. The first bill they send is often an offer.  If you have extenuating circumstances, you can use that to your advantage.
  • Ask the hospital or other provider if they can offer a 0% interest payment plan. Many times, you do not even have to qualify.  This option is preferable to a hospital because it saves them from having to sell the bad debt to a collection company for a fraction of the cost.

If you are buried in medical bills and have exhausted your options, you need help.  Bankruptcy can be a wonderful tool for people in this situation.  Medical bills are an unsecured debt and can be drastically reduced or eliminated altogether in bankruptcy.  Contact Elias Dsouza for a free bankruptcy consultation.

Do Not Skip Court: A Tori Spelling Story

A default judgement is defined as a binding judgement in favor of one party based on the inaction of the other party.  A default judgement can be handed down if you skip court.  Even if you do not think you will win your case, you should at least show up so you have a chance.  In 2017, Tori Spelling failed to respond to City National Bank’s allegations and a default judgement was levied against her.  Now she has to pay $220,000.

The Debt

In 2012, Tori and her husband Dean McDermott took out a $400,000 loan.  The couple quickly fell behind on payments and in 2017, the bank took them to court.  According to court documents, the borrowers still owed about $188,000 for the loan and an additional $17,000 which Tori over drew from her checking account.   Unfortunately, the couple had just been taken to court by American Express for failure to pay over $87,000 in credit card charges.  Needless to say, their spending was out of control.

The Court Date

Instead of responding to Citi National’s court claims against them, Tori and Dean decided to completely ignore the case.  They did not respond to the court via phone or mail.  Ultimately, they decided to skip their court date as well which led to a default judgement for Citi National.  A default judgement handed a win to the bank and the couple was immediately ordered to pay back over $200,000.

She claims that her financial issues stem from a lavish upbringing.  In her memoire, she stated “It’s no mystery why I have money problems. I grew up rich beyond anyone’s wildest dreams. I never knew anything else.”  She went on to say, “Even when I try to embrace a simpler lifestyle, I can’t seem to let go of my expensive tastes. Even when my tastes aren’t fancy, they’re still costly. I moved houses to simplify my life, but lost almost a million dollars along the way.”

There are plenty of reasons people fall behind on credit card or mortgage payments, but there is no reason to let it ruin your life.  You have options.  With the skills and experience of a debt defense attorney like Elias Dsouza, you can reclaim your life and get the fresh start you deserve.  Contact Elias for a free consultation.

How to Keep Your Car During Chapter 7 Bankruptcy

It is a common misconception that you have to give up everything valuable during chapter 7 bankruptcy.  You can file a car redemption motion.  This option could be a game changer because it saves you money in the long run.  A car is an essential asset when it comes to getting to and from work, hauling the kids around, and performing a multitude of other everyday actions.

What is Vehicle Redemption?

Vehicle redemption is a mechanism built into chapter 7 bankruptcy which allows you to file a motion to buy your car for fair market value.  This means you must pay the lender in the amount of the determined value of the car in one lump sum.  This may be difficult in some cases, but the upside is that you get to keep your vehicle and avoid paying thousands in loan servicing interest payments.  If you do not have the money for the lump sum, companies such as 722 Redemption may be able to give you a redemption loan which would allow you to keep your car.

It should be noted that you may not be able to redeem a work vehicle.  Car redemption is for personal and family vehicles in most cases.

Before You File for Vehicle Redemption

If you plan on filing a vehicle redemption motion during bankruptcy, there are some steps to take before you do so:

  • Determine your vehicle’s value – there are a number of ways to do this.
  • Notify your lender of the motion – you need to let your lender know that you are filing for chapter 7 bankruptcy and that you intend to file a motion for vehicle redemption. You and the lender must agree on the value of the vehicle.  You should have evidence of your vehicle’s value during negotiations.  If you cannot come to an agreement, you may need to use your evidence to prove to the court that your valuation is more accurate.

Chapter 7 bankruptcy is a very complex process and you should not do it alone.  If not handled properly, you could harm yourself in the long run.  Enlist the services of a skilled and experienced attorney.  Elias Dsouza of Dsouza and Strachan Lawgroup Group has been helping people navigate bankruptcy for over 15 years.

The “Coming Storm of Broke Elderly”

This phrase was coined in a paper published by the Social Science Research Network in August of this year.  According to the paper, from 1991 to 2016, the bankruptcy rate for people over the age of 65 has risen 204%.  Explanations include low income, scarce or failing pensions, and the furious rise in health care costs. 

What is Causing the Increase in Bankruptcy Rate?

There are many factors that cause debt to pile up and make bankruptcy the only option, but for people 65 and older, three of the main factors are:

  • Low income – According to aarp.org, in 2012, the average income for people 65 and older was $31,742. The Kaiser Family Foundation reported that out-of-pocket health care costs consume about 41% of the income of people over 65.
  • Failing pension plans – The Society for Human Resource Management projects that 114 major multi-employer pension plans will fail in the next 20 years due to lack of funding. The Federal Government’s own pension plans are looking at a $7 trillion deficit and Congress says it may be too late to fix it (com).
  • Rising health care costs – Fidelity Investments released a report that stated “A Couple Retiring in 2018 Would Need an Estimated $280,000 to Cover Health Care Costs in Retirement”. According to com, the average 401k balance for individuals 60-69 was $167,700 in 2017.

Why Do People over 65 Wait to Seek Help?

Most people 65 and older were raised by parents who lived through the great depression.  Asking for help is not easy and often not even considered.  They throw minimum payments at the credit card bills over and over again because they believe paying their bills is the honorable thing to do even though they are not reducing their principle balance.  Then, a medical emergency happens and they have to stop paying their bills.

Some Quotes from People in the Study

When speaking to the authors of theGraying of U.S. Bankruptcy: Fallout from Life in a Risk Society” study, subjects said:

  • “My wife developed medical problems and had to leave her job, resulting in a loss of income. About two years later, I developed medical problems and was not able to continue working,”
  • “We got to a point where we simply could not handle the debt load. The constant calls from bill collectors forced us to contact an attorney for help.”

If you, your parents, grandparents, or any other loved ones are being harassed by creditors, you are not alone.   Circumstances are often out of our control and sometimes bankruptcy can actually be a good option.  To utilize this tool, you need the experience of a skilled bankruptcy attorney.  Elias Dsouza of Dsouza and Strachan Lawgroup Group is dedicated to helping people regain control of their life and finances.  Contact Elias today for a free consultation.

Claire’s: A Bankruptcy Success Story

In March of this year, Claire’s began to crumble under the weight of just over $2 billion in debt.  With stores in nearly every mall in America, the ear-piercing giant was feeling the decline of the mall as we know it.  Unable to pierce ears over the internet, Claire’s has suffered the same reduction in foot traffic as most of the stores in malls have these days.  Chapter 11 bankruptcy became inevitable. However, this particular bankruptcy story may have a successful ending.

Chapter 11 Filing

Claire’s has pierced over 100 million ears around the world.  Unfortunately, they hitched their wagon to thousands of malls that are seeing less and less traffic every year.  However, many believe the real reason they are over $2 billion in debt is that, in 2007, a private equity firm called Apollo Management bought the company for $3.1 billion and took them private.

As this happened just before the market plummeted in 2008, debt piled up for a few years and the company could not find its way out of the rubble.  Claire’s leadership said they believed they could rid themselves of about $1.9 billion in debt and the bankruptcy filing would position the company to grow in the near future.

Escaping Bankruptcy

After only a few months, Claire’s has managed to reorganize under chapter 11 and:

  • Obtain $575 million in new capital.
  • Close about 5000 stores.
  • Franchise over 600 stores to private companies.
  • Pass control of the company from Apollo Management to their creditors.
  • Expand its concession locations to further stimulate growth with reduced future risk.

There are always those that lose out when a company files for bankruptcy.  Thousands of employees were laid off.  While this is unfortunate, Claire’s leadership is hopeful that it opens doors for the company to hire again in the future.

If you or your company find yourself in a no-win situation, you need help.  Navigating the bankruptcy process is complex and stressful.  You need the skills and resources of an experienced bankruptcy attorney.  Elias Dsouza understands the process of bankruptcy and can guide you and your company back to the path.  Contact Elias Dsouza for a free consultation.

Any Chance for Mattress Firm to Avoid Bankruptcy Has Been Put to Bed

Mattress Firm is the largest bed store in America.  They have over 3,500 locations after merging with their largest competitor.  Unfortunately, this merger and the rise of online bed-in-a-box shopping has eaten up the company’s market share and taken customers out of their stores.

About Mattress Firm

According to their website, Mattress Firm has over 3,500 store locations in 49 states.  At their peak, in 2015, they reported over $3.5 billion in sales.  Over the last 30 years they have absorbed companies such as:

  • Sleep Train – purchased for $425 million in 2014, this company was huge in the west and northwest.
  • Discount Mattress Barn – was purchased and rebranded in 2014.
  • Sleep Country USA – also a large chain in the pacific northwest, this company changed their brand name after being purchased by Mattress Firm in 2015.
  • Sleepy’s – in 2015, this company was bought out for $780 million.

The last purchase left Mattress Firm with over 3,500 stores.  While this can be indicative of a strong successful company, sometimes it is too much growth to be sustainable.

Mattress Firm’s Problems

As previously stated, too much growth can be a killer for a company.  The CEO of Mattress Firm admitted that they had too many stores competing with one another.  In 1990, the company tried its hand at selling furniture which was a complete failure. However, the companies biggest mistake was waiting to create an online presence.  Casper may be personally responsible for changing the mattress industry and burying Mattress Firm.  Casper is known for great customer service, a sleek website, and shipping (for free) a high-quality mattress-in-a-box.  Even today, Mattress Firm’s website is not as modern and inviting as Casper’s.

Mattress Firm

mattress firm

Casper

casper

Every year, dozens of companies are failing because of their refusal to invest in their online presence.

Details of Mattress Firm’s Bankruptcy

After filing for chapter 11 bankruptcy, the company plans to:

  • Close 200 stores immediately.
  • Close 500 more stores by the end of the year.
  • Exit bankruptcy within two months.
  • Open stores in new thriving markets.

Another note, Casper plans to open 200 brick and mortar locations in the near future to catch customers who prefer to feel the mattress before they purchase it.

Bankruptcy is a valuable tool that can be used to get you or your business back on track.  It is also a very complex process.  To use this valuable tool, you need the experience and skill of a licensed attorney.  Elias Dsouza has the experience and skill you need to get back to business.

After 125 Years in Business, Sears Files for Bankruptcy

Just about everyone in America has heard of Sears.  They have been selling us anything from jack-hammers to mittens for over a century.  The giant has been wobbling for some time and now they are officially filing for chapter 11 bankruptcy protection.  Sears is one of the more notable victims of the “online shopping era”. 

A Little Background on Sears

Sears began as Sears, Robuck, and Company in 1892.  They were, at one time, headquartered in the Sears Tower in Chicago.  They started off as a private company, but in 1906 they launched a successful IPO.  Sears is known as one of the first companies to offer their products in an extensive catalogue.  At one time, their catalogue grew to 532 pages!  More recently, Sears merged with Kmart which most people believe was the beginning of the end.

The Kmart Merger

In 2004, after completing its own bankruptcy, Kmart declared that it was merging with Sears.  The $11 billion acquisition yielded a profitable 2006 ($1.5 billion), but soon began to see sales slump.  Between 2011 and 2016, it was reported that Sears lost over $10 billion.  In 2014, Sears began selling off properties and brands to pivot into the technology sector, but by then they were rapidly losing market share to companies like Wal Mart and Amazon.

Chapter 11 Bankruptcy

On October 15, 2018, Sears announced that they were seeking chapter 11 bankruptcy protection.  The CEO, Eddie Lambert, stepped down and three top Sears executives were appointed to see the company through bankruptcy. Additionally, Mohsin Meghji, was named Chief Restructuring Officer.  The current proposed restructuring plan is to:

  • Close 142 stores worldwide.
  • Begin liquidation sales by the end of the year.
  • Focus on the most profitable 400 stores and keep the 68,000 employees working.

Sears is already over $4 billion in debt and the former CEO of Toys ‘R’ Us (for more information on Toys ‘R’ Us’ recent bankruptcy, see Why Did Toys ‘R’ Us Go Bankrupt?) recently commented, “Sears is essentially dead already”.

Bankruptcy can be a terrifying prospect.  The truth is, bankruptcy is a tool to help you or your business get back on track.  If you are considering bankruptcy as an option, you need the skills of an experienced attorney.  Elias Dsouza has been helping people and businesses get back on track for over 15 years.  Contact Elias for a free consultation today.

Why Did Toys ‘R’ Us Go Bankrupt?

Toys ‘R’ Us was a goliath in the toy industry for decades.  It was publicly traded on Wall Street for almost 30 years starting in 1978.  At its peak, the toy retailer’s stock traded for over $45 per share.  Unfortunately, this got the attention of other retailers.  Companies such as Wal-Mart, Target, and Amazon began to steal market share which was the beginning of the end for the toy giant.

Going Private

In 2005, several private equity firms came together to buy up all Toys ‘R’ Us stock for about $6.6 billion.  Unfortunately for those firms, over the next 15 years, competition slowly chipped away at the market share.  Saddled with tons of debt from the stock acquisition and unable to adapt to the changing retail sales model, Toys ‘R’ Us looked to a new CEO.

Plans to Go Public Again

In 2015, David Brandon was hired and many suspected it was to take the company public again.  He was the CEO of Domino’s for 11 years and took them public.  Losing market share and value, public money was the “shot in the arm” Toys ‘R’ Us needed to keep from going under.  However, in October of 2017, any chance the toy company had of surviving was ruined.

The October 2017 Report

Due to the leveraged buyout back in 2005, Toys ‘R’ Us was operating with a huge amount of debt.  Many of the company’s financial obligations were pushed to 2017.  The company failed to go public before the bills were due so they did not have the capital to meet their obligations.  The real “nail in the coffin” came in October of 2017 when a financial report came out stating that, between October of 2016 and October 2017 the toy company operated at a loss of over $950 million.  This killed any chance of going public.  Additionally, consumers were reluctant to shop there during the holiday season particularly for gift cards out of fear that the company would not survive to honor them or provide customer support.

You may not have failed as spectacularly as Toys ‘R’ Us, but your small business may have failed nonetheless.  Being behind on loans and getting harassed by creditors is a horrible feeling that may keep you up at night.  If you find yourself in this position, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group.  He has the skills and experience to walk your through the filing and give you your life back by halting those phone calls and letters from creditors.

Lindsey Lohan’s Mom Files for Bankruptcy

So often is the case that a famous person bites off more than they can chew.  Whether it be houses, jewelry, or friends, people who have money seem to spend money.  Unfortunately, the latest celebrity (kind of) to file for bankruptcy is Dina Lohan.  Dina has been an actor, producer, talent manager, singer, and more in her career which has netted her an estimated $1.3 million.

The Divorce

In 2007, Dina’s divorce was finalized.  Her 22-year marriage to Scott Lohan was marred by alcohol, cocaine, and physical abuse.  Dina maintained custody of their 3 younger kids and the kid’s childhood home which had a mortgage of $1.5 million.

Property Debt

As previously stated, Dina got to keep the home and the $1.5 million in debt that came with it.  Dina has made a decent amount of money throughout her career, but in 2017 the mortgage became too much for her to handle.  The house went into foreclosure even though Lindsay gave her $40,000 to help.  Dina eventually lost the home because she did not respond to the suit within 90 days of the suit filing.  If Dina had read “So You Are Behind on Your Mortgage Payments and You Are Facing Foreclosure” she would have known better.

Taxes and Other Debt

Dina owes thousands in taxes to New York and California.  It is estimated that she owes $4,651 to California and at least $9,000 to New York state.  In addition to state taxes, Dina owes over $45,000 to the IRS, over $10,000 for her Honda, and over $10,000 to her kid’s high school.

Debt can feel insurmountable.  Debt can BE insurmountable.  When this is the case, bankruptcy is a perfectly valid option.  It is a legal tool designed to help an individual (or business) get out from under the thumb of creditors.  People can be forced to file for bankruptcy for many reasons and, while it is not ideal, it can help you move on with your life.  If you are constantly being harassed by creditors and you are ready for a change, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group.  Elias has been helping individuals and businesses navigate the complex process of filing for bankruptcy for over 15 years.  He has the skills to enable you to move forward with your life.