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More Americans Are 90 Days Late on Their Car Payment Than Ever Before

There may be new evidence that a strong job market does not necessarily lead to financial freedom for individuals.  Over 7 million Americans are at least 90 days behind on their car payment.  A car is a necessity for most people and the idea of losing it to repossession is enough to keep them awake at night.  What can these individuals do to get back on track?

Who Is Struggling with Car Payments?

According to a recent article in the Washington Post, the majority of the people that are 3 months behind on their payments are under the age of 30.  They have low credit scores and they are finding it difficult to pay their monthly student loan bills.  A large portion of these borrowers are “subprime” meaning their credit score is under 620.  Most of the borrowers that are more than 90 days late on their payments received their loans from a “car finance” company as opposed to a traditional credit union or bank.  Less than 1% of borrowers from credit unions are 90 days late on payments.

Is Medical Bankruptcy a Real Thing?

Medical bills are the number one reason for bankruptcy in the United States.  Multiple studies have shown the in 25% – 50% of bankruptcies, medical debt was significant.  However, the answer to the question ‘is medical bankruptcy a real thing?’ is ‘no’.  While medical bills are a heavy contributor to personal bankruptcy, it is not its own form of bankruptcy.  It is, however, an interesting topic that has reached as far as Washington D.C. and ‘medical bankruptcy’ is a term that is resurfacing as Elizabeth Warren begins her bid for Presidential election in 2020.

What is ‘Medical Bankruptcy’?

This is a concept that was first made famous by a couple of papers written by a group which included Elizabeth Warren in 2005 and in 2009.  The papers claim that at least 50% of all bankruptcies were caused by medical debt.  A ‘medical bankruptcy’ is one that is linked to substantial medical debt.  Many experts have since refuted the accuracy of the claim.  However, what cannot be refuted is that medical debt is a major contributor to many bankruptcies. 

Can You File for Personal Medical Bankruptcy?

In short, no.  There is no legal version of bankruptcy called ‘medical bankruptcy’.  In terms of personal bankruptcy, you are mostly limited to chapter 7 and chapter 13 depending on your income limitations.  That does not change the fact that debt related to medical expenses is a serious consideration when filing for any type of debt relief.  Medical debt is considered ‘unsecured’.  This means, just like credit card debt, it can be reduced or even eliminated during the bankruptcy process.

When Should You File for Bankruptcy Due to Medical Debt?

Well, there are many factors that go into the decision:

  • Are you behind on medical bill payments?
  • Are you missing payments altogether?
  • Are you receiving snail mail and phone calls from collectors day and night?
  • Are you behind on other bills such as mortgage, credit card, and car loans?

If the answer is ‘yes’ to even half of those questions, it might be time to talk to a professional.  In many cases, medical debt is valuable and debt collectors do not give up easily.  Harassment from debt collectors does not have to be a way of life for you.  Elias Dsouza is a skilled and licensed attorney that is equipped to guide you through any debt settlement process.  He can help you determine if bankruptcy or debt settlement is the right answer for you.  Contact Elias today for a free consultation.

Did You File for Bankruptcy in 2018? Here Is How It Affects Your Tax Return

So, you made the decision to reclaim your life from financial trouble in 2018 and file for bankruptcy.  When you file, you basically separate from your estate.  You can think of your estate as a separate person.  This can create some complexities during tax season.  To add more into the mix, the chapter under which you file can change things!  Read on to learn more about the fun of taxes after bankruptcy!

Taxes After Chapter 7

If you utilize bankruptcy under chapter 7, you will face certain limitations with regard to tax debt.  For example, you can only discharge income tax.  You cannot discharge tax debt that is more than three years old.  Also, the tax return associated with the debt cannot have been filed more than two years before the bankruptcy.  In addition to the afore mentioned stipulations:

  • The tax return must not have been filed by the IRS. This is what is called a “substitute return” and debt created by this return cannot be forgiven during bankruptcy;
  • Only taxes that were assessed within 240 days of bankruptcy can be forgiven;
  • The debtor cannot have a previous conviction of tax evasion or fraud.

Taxes After Chapter 11

A bankruptcy court will take a look at your current tax situation as well as the situation you will be in for the foreseeable future.  If the court does not believe you can handle your tax situation, they will reject your bankruptcy filing under chapter 11 and force you to convert to chapter 7.  In addition to this tax consideration, those who file under chapter 11 must be able to shoulder the burden of capital gains resulting from property sold.

Taxes After Chapter 13

Remember, people who file under chapter 13 must forward all disposable income into an account meant to pay off debt and controlled by a trustee.  If your tax return was not figured into the calculations done when filing for bankruptcy, the refund is considered disposable and must be forwarded to the trustee.  If your expenses have changed, you can petition the court to give you all or part of you refund to put toward the new expenses.  This process is called “excusing a refund”.  To do this, you must:

  • Tell the court how much you need;
  • Inform the court of which refund you are petitioning to excuse;
  • Specify why you need the refund excused (wholly or partially).

Taxes are confusing without the addition of bankruptcy, but sometimes a complex problem requires a complex solution.  If you are considering bankruptcy, contact Elias Dsouza.  He has the knowledge and experience to guide you through bankruptcy.

How the New Bankruptcy Bill Affects Small Businesses

There are many reasons a business looks at bankruptcy as an option.  Competition, economic climate, lawsuits, and many more situations can create an unsustainable environment.  Believe it or not, some businesses cannot afford to declare bankruptcy so they just close.  The new bankruptcy bill was inevitable.  Support for small businesses similar to that of chapters 12 and 13 is long overdue.  It shortens the amount of time it takes to file, allows small businesses to file at a cheaper rate, and allows the business to maintain more control during the process.

Back in the Day

Life before the Small Business Reorganization Act of 2018 was pretty grim for a failing business.  A business that was considering bankruptcy almost certainly had to follow the rules of chapter 11.  They had to file within 120 days of declaration, were forced to notify and plan with creditors, and the process was very expensive.  So expensive, in fact, that many businesses chose to close instead of potentially saving their business through bankruptcy.

The New Bill

The Small Business Reorganization Act of 2018 gives struggling businesses with less than $2.5 million in debt, the opportunity to file for bankruptcy in a way that mimics chapter 13.  For example, under the new bill, a small business will not be expected to pay over $25,000 to a creditor in the first 90 days of bankruptcy.  Bankruptcy under the new sub-chapters will greatly reduce the cost of the process which can be around $300,000. 

What Is Required to Declare Bankruptcy Under the New Sub-Chapter V?

Of course, there are still requirements for a small business if they wish to take advantage of this new opportunity.  Under sub-chapter V, a small business must:

  • Give a brief history of the business which is declaring bankruptcy;
  • Provide data to support the execution of the repayment plan proposed by the debtor;
  • Offer a detailed description of the business’s ability to liquidate;
  • Put a system in place to allow for the funneling of all future earnings to the designated trustee to support payment to creditors.

Bankruptcy is often thought of as a negative outcome for a business, but this does not have to be the case.  New laws are making it more possible for a business to declare bankruptcy and stay open.  If your small business is struggling and you need help understanding your options, contact Dsouza and Strachan Lawgroup Group for a free consultation.  Elias has been helping businesses with their financial troubles for over 15 years.

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, 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.