Mitchell & Culp

Hospital Debt Collections: Advice from a Bankruptcy Attorney

Heather Culp — Wed, 09 May 2012 11:42:35 +0000

Everyone seems to be talking about the Charlotte Observer series on hospital debt collections, including our clients and people I meet through speaking engagements such as the Charlotte Works class.

My personal experience with medical debt

It certainly brings back memories of the spring of 2009, when my husband (and fellow attorney) spent two weeks in Presbyterian Hospital for emergency surgery. Knock on wood, we’re both relatively young and healthy, and since I do not have children, this was my first experience facing overwhelming medical bills. The medical expenses for that illness totaled around $50,000, and although we had good health insurance, we were still responsible for a little more than $6,000 in out of pocket costs.

Before he was out of the hospital, and before the insurance claims were even submitted, Presbyterian’s billing department called him and me, and wrote to us, asking that we settle our charges before he was discharged. It was a tremendously stressful time.

FAQs on medical bills from a bankruptcy attorney

What do people want to know about medical bills? The questions we answer most frequently are:

Q: Should I borrow against my retirement, or cash it out, to pay my medical bills?

A: We always advise against this, because most tax-deferred retirement accounts are exempt (out of the reach of creditors), and because of the burden of the tax consequences of early withdrawals.

Q: What are my options if I can’t pay the medical bills?

A: Generally, you can work out an installment plan with the provider; if this is not an affordable option, then bankruptcy must be considered. Another option is to do nothing: let the creditor get a judgment. North Carolina law does not allow for wage garnishment for medical debts,and many folks that we see do not have any property that can be taken from them to satisfy a judgment. However, this legal process can be frightening, in part due to collection letters such as this Carolinas Medical Center demand letter

Q: If I declare bankruptcy and discharge debts owed to my doctor, will he or she refuse to further treat me?

A: It’s possible, but not likely, according to the experiences of our clients. Further, the bankruptcy code allows debtors to volunteer to pay discharged debts, and this does not waive the discharge injunction (the provision of the bankruptcy law that prohibits creditors from contacting debtors about discharged debts). Many debtors express a desire to pay a medical provider with whom they have a long-standing relationship, and this provision allows that.

Q: Can spouses be held responsible for each other’s medical debts?

A: We’ve written about this before. Here’s the basic answer, “yes” even when the spouse did not sign a credit application and that spouse did not sign or any agreement to be responsible for the bills.

We find that medical debt collections are complicated by the stress of the underlying illness or medical issue. Therefore, consider consulting with a qualified attorney before succumbing to what can be a heartless process.

This document is intended as an informational reminder and does not constitute legal advice. If you have any questions or would like to discuss a particular situation, please contact the author. The purpose of this document is to provide general information about North Carolina legal issues and should not be construed as legal advice on any specific facts and circumstances.

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Online Financial Calculators

Heather Culp — Thu, 26 Apr 2012 13:49:39 +0000

As I’ve remarked before, I wish we did a better job in providing financial literacy education to young adults. So many of the clients we see in our law office learn the hard way how not to manage their finances. Fortunately there are some online tools to help.

I’ve previously written about Pronet, a wonderful resource for unemployed and underemployed Charlotte professionals. My friend Karen Boothe and I have committed to teaching monthly to interested Pronet members a three-hour workshop called “Managing Financially through Crisis.” Karen gives financial and investment advice and I strive to educate about the legal options available to those who find themselves struggling or unable to pay their bills following a job loss or job reduction.

In our first, March class, Karen sang the praises of the website www.smartaboutmoney.org, run by the National Endowment for Financial Education, an “independent, nonprofit foundation committed to teaching Americans on a broad range of financial topics and empowering them to make positive and sound decisions to reach their financial goals.” She highly recommends the online financial calculators and other information as particularly user-friendly for the average consumer.

USAA resources

I’m lucky to be a member of USAA, the United Services Automobile Association and its related insurance, banking, investment, and other companies. My parents signed me up for my first credit card with USAA, when I was 17 and a freshman in college. (The $500 limit seemed to go so far!) Membership is open to those who have honorably served in the U.S. military as well as their families; you can read more on their website.

Its website offers excellent financial, debt, credit, and investment advice to members who are registered users. Every time I log on, I’m impressed by the information at my fingertips. If you’re a member (or can become one), don’t overlook this wonderful resource., including online financial calculators.

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Are Bankruptcy Filings Slowing Down?

Heather Culp — Tue, 24 Apr 2012 14:00:54 +0000

Friends, family, former clients, current clients all routinely ask if our work is slowing down. The answer is no.

United States Bankruptcy Court for the Western District of North Carolina Divisional Map.

While there are some signs that the economy is improving, times are still tough. The US Courts track bankruptcy filings for each district, and the Western District of North Carolina shows filings down a minuscule 1.1% between March 2010-2011.

As my law partner Rick Mitchell often reminds me, there is usually a three-year lag time between any recovery in the economy and when folks actually get back on their feet – this, based on his 30+ years as a Chapter 7 bankruptcy trustee and attorney for debtors and creditors.

Further, since the start of the recession, we’ve seen our clients’ financial problems become increasingly complex, requiring more work and energy from them and from us. This is illustrated in this interactive map, also published by the US Courts. In summary, the map shows that the Western District’s average Chapter 7 bankruptcy case is $166, 347 in assets and $262,666 in liabilities; Chapter 13 shows an average of $180,882 in assets and $217,284 in liabilities.

Whether you are chronically un- or under-employed, retired, or own a business, the recession has been tough. Bankruptcy counseling will help you determine whether filing for bankruptcy protection is a viable option to help you re-launch your life.

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Senior Citizens and Foreclosure Proceedings

Heather Culp — Mon, 23 Apr 2012 14:38:09 +0000

One of the heartbreaking realities of our practice in insolvency law is getting a phone call from an adult child who has just learned that a credit card company has sued or obtained a judgment against his or her parent, or that their parent’s real estate is in foreclosure because of missed mortgage, HOA or real estate tax payments. In our line of work, it is rare to see a senior citizen with a fully-owned home; most have mortgages.

Medical bills, credit cards and missed mortgage payments

When medical bills (or other living expenses) are paid with credit cards, there may come a time when senior citizens on a fixed income can no longer service the debt. Sometimes, seniors choose not to rely on credit cards, instead using cash usually reserved for the mortgage and other real estate expenses to pay for health-related expenses, which results in them falling behind on their mortgage payments. At some point the credit card company may attempt to collect the balance owed (including interest, fees and legal expenses) through a lawsuit. Likewise, the mortgage company may initiate foreclosure proceedings.

Sometimes senior citizens turn to their children for help only when the courts are involved. I can recall at least two cases over the past year or so, where the child has called because the parent has asked for help responding to the sheriff’s deputy who’s trying to collect the judgment debt. Until that point, the children had no idea how much debt their parents were facing.

Chapter 13 to the rescue

The good news is that bankruptcy may provide some much needed debt relief to seniors with debts that they cannot repay; further, a Chapter 13 bankruptcy filing may keep some homeowners from losing their homes. Because seniors often are not skilled internet navigators and feel a unique generational stigma about financial problems, their children may be the ones who do the research and help them make decisions.

IMPORTANT: mortgage loans can be reinstated in a Chapter 13 bankruptcy case at any time before the foreclosure sale becomes final (a technical legal concept). This allows homeowners to stay in their homes and repay in their bankruptcy case the payments missed before the filing of their Chapter 13 bankruptcy case, as long as they keep current on their monthly payments as they are due during the bankruptcy.

The affordability of this option depends upon the specific facts of the homeowner’s case, including their income, expenses, the equity in the property, and whether there are co-owners.

AARP weighs in on fraudulent foreclosure practices

This advice from the American Association of Retired Persons on the Feb. 9 announcement that state and federal officials reached a landmark settlement with five of the nation’s largest banks over their flawed and fraudulent foreclosure practices:

Contact information for the five companies — Ally/GMAC; Bank of America; Citi; JPMorgan Chase and Wells Fargo.

Contact information for each State Attorney General’s office.

Contact information for U.S. Department of Justice officials involved in the settlement.

Additional information on the settlement itself, including updated questions and answers as they occur.

Protect your money: Don’t fall for scammers who want to charge fees to help you “navigate” the national mortgage settlement.

Please go to nationalmortgagesettlement.com if your mortgage loan is held — or if you think it might be held — by one of the five companies listed above.

For general consumer guidance on dealing with loan modification and foreclosure rescue companies and what to watch out for, call your State Attorney General’s officeand see this alert on Home Loan Modification Scams (PDF) prepared by AARP Foundation, ElderWatch, the Colorado Attorney General and the Colorado Better Business Bureau.

A bankruptcy counseling session is a great way to learn your legal rights and potential remedies for financial difficulties.

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Tax Refunds for Bankruptcy Filing Fees

Heather Culp — Wed, 18 Apr 2012 12:57:33 +0000

The National Bureau of Economic Research confirmed recently that personal bankruptcy filings usually spike right after Americans receive their tax refunds. A USAToday story on this correlation quoted Jialan Wang, assistant professor of finance at Washington University in St. Louis and an author of the NBER study as saying, sadly, ”The people who really need bankruptcy are the ones who will be unable to pay for the fees.”

Begin with a bankruptcy counseling session

It costs nothing to explore whether you’re a candidate for bankruptcy protection. We offer an initial bankruptcy consultation to potential clients that we speak to on the telephone and determine may benefit from discussing a bankruptcy case; there is no charge for our initial bankruptcy consultation unless you hire us to perform legal services for you. If you hire us, you’ll pay for the session and our bankruptcy services as (generally) follows:

Chapter 7 attorney’s fees vary from office to office, are usually a flat fee, and are based on a variety of factors, including the complexity of the case, the experience level of the attorney, whether there is one debtor or co-debtors (typically, a husband and wife who both need to file), whether the debtor is self-employed, and whether the debtor owns significant property or is involved in multiple lawsuits.

Our office generally charges a minimum attorney fee of $2000.00 for a simple, single-debtor Chapter 7 bankruptcy, and usually charges between $2500.00 and $3500.00 for joint-debtor or otherwise with fees increasing based on the complexity of the case. Our office requires that both the filing fee and the entire attorney’s fee be paid, in cash or certified funds, prior to the filing of the petition. We occasionally handle a Chapter 7 bankruptcy filing on an hourly fee basis, where it is hard to predict how much legal work will be required throughout the bankruptcy case. This usually winds up being more expensive to the client than a flat fee.

Chapter 13 attorney’s fees are set by the bankruptcy court, and are a flat fee of $3250.00 for base fee services – a defined set of usual work done in Chapter 13 cases.

Unusual work, known as “non-base fee” work, is usually charged at a separate hourly rate agreed to by the client and the attorney prior to the bankruptcy filing. Most attorneys require that a portion of the $3250.00 base fee be paid prior to the bankruptcy filing, with the remaining fee included in the monthly plan payments made by the debtor to the trustee.

Chapter 11 attorney’s fees vary from attorney to attorney, and are generally provided at an hourly rate (not a flat fee rate). Chapter 11 attorney’s fees generally cost at least $15,000.00 over the life of the case.

Our office generally requires an advance fee deposit of at least $10,000.00 to file a Chapter 11 case, and will require additional deposits or payments during the life of the case, as needed.

Bankruptcy Court Costs

Effective November 1, 2011 filing fees charged by the bankruptcy court is as follows:

Chapter 7–$306
Chapter 11–$1,046
Chapter 12–$246
Chapter 13–$281
Chapter 15–$1,046

As you see, many costs are set by the courts, so the question to ask when trying to find a practitioner or firm you is whether they have the change expertise to experience and ability expertise for your situation. After that, consider the “people skills” of the legal team — financial problems are stressful.

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ProNet Seminar: Commonly-Asked Financial Questions from Professionals in Transition

Heather Culp — Wed, 28 Mar 2012 14:40:23 +0000

I recently learned about ProNet Charlotte, a local resource for professionals in career transition. ProNet describes itself as “a private/public partnership created by the Charlotte Mecklenburg Workforce Development Board by bringing together local businesses who donate in-kind services and a grant from the State of North Carolina Department of Commerce – Workforce Development Division.” It offers services to professionals “who have recently lost a job, have concerns about the future of their current jobs or are considering a career change.” ProNet is free and offers online networking tools, access to job fairs, job training, workshops, resume and interviewing coaching, and the like.

I was completely unaware of the great resources ProNet offers until earlier this year; it is in a beautiful and cheerful space in the Coca-Cola Bottling Company building on West Morehead Street, near The Open Kitchen. It seems to fill a critical niche for Charlotte.

I was invited to be one of the presenters of a new ProNet class this month, called Managing Financially Through Crisis. The class was limited to 10, so we could have a more intimate and meaningful dialog about a sensitive subject. A financial professional spoke on topics of money management, budgeting, and the like, and I spoke with the class for the final hour on issues relating to bankruptcy and insolvency.

Financial Q&A for professionals in transition

As I’ve written before, this economy has sent college-educated and career-tenured professionals into career and financial headwinds they’ve never encountered before. Most have never had to acquaint themselves with laws regarding exempt property, student loan discharge, foreclosure and repossession. Here are answers to the questions that concerned the majority of the workshop participants.

Q: Can I discharge my student loans in bankruptcy?

A: This is a painful answer to relay, but the answer is almost always “no.” Section 523(a)(8) of the Bankruptcy Code provides that student loan debts (including private student loans) are not dischargeable in a bankruptcy case unless the debtor can show that repaying the debt would impose an undue hardship on the debtor and the debtor’s dependents. As my law partner Rick often says, if you’re deaf, blind, and missing all four limbs, you’ve got a 50/50 shot at proving undue hardship under this section.

Other posts we’ve written on student loans and bankruptcy are found here.

Q: If one spouse files for bankruptcy protection, does the other have to file (the concept of the non-filing spouse)?

A: This is a complex area of the law, and we’ve covered various aspects of it in other posts.

It depends on whether the other spouse is liable for debts (solely, or jointly with the spouse) that he or she cannot pay. If so, then a joint bankruptcy probably makes sense. If not, then only the spouse liable for the debt files a bankruptcy, but it is important to understand that the Bankruptcy Code requires that the debtor file a budget that includes household income and expenses. This means that while the non-filing spouse does not file for bankruptcy, and his or her credit is not affected by the spouse’s filing, the non-filing spouse’s income and expenses must be included in the budget portion of the bankruptcy petition.

Q: But the bank owns my car, because I financed it, so can I use a vehicle exemption when creditors attempt to use it to collect on judgments?

A. The general rule to keep in mind is that ownership is determined from title and registration.

This post discusses the options available to debtors who are filing for Chapter 7 bankruptcy protection concerning financed personal property.

Q: What property is liquidated in Chapter 7?

The easy answer is, non-exempt property. Knowing which property can and cannot be liquidated is one of the most important reasons to hire an experienced bankruptcy attorney. If you want to start the research process, this page on asset planning and protection provides an overview.

If you are troubled with your financial picture, consider a bankruptcy counseling session. In a bankruptcy counseling session your attorney will look for the best solution to your financial difficulties, which may or may not include filing for bankruptcy protection.

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How Debts are Collected in North Carolina

Heather Culp — Wed, 21 Mar 2012 15:35:57 +0000

You may know that North Carolina law allows judgment creditors to collect judgments owed to them in certain ways and under certain circumstances, and that these laws vary from state to state. You may also know that North Carolina does not allow wage garnishment for consumer debts (credit cards, auto loans, mortgages, and the like) or for many private business debts (money owed to vendors, banks, the SBA, and the like). N.C.G.S. § 1‑362. The North Carolina Department of Labor sums things up nicely here.

So, while a North Carolina employer cannot withhold wages to pay to a credit card company with a judgment the employee, but once an individual’s wages are deposited in a bank account, they may lose their protection.

Why?

The process of collecting on a judgement in North Carolina

Under North Carolina law, the process of collecting on a judgment against an individual includes the judgment creditor sending to the judgment debtor a Notice of Right to Designate Exempt Property.

The judgment debtor has only 20 days to serve and file a response. If the judgment debtor does not respond, then the judgment debtor’s exemptions are waived (including the exemption of wages earned within the past 60 days and reasonably necessary for the use of a family supported by the labor). Further, judgment creditors can and do repeatedly send these Notices, hoping that at some point, the judgment debtor will trip up and fail to timely respond – thus waiving the exemption.

How bankruptcy works when dealing with judgment creditors

If filed timely, a bankruptcy can revive exemptions and provide a mechanism for the return to the judgment debtor of wages taken from a bank account to satisfy a judgment. This law can be very complex and is always both fact specific and subject to strict timing rules.

Bottom line, both North Carolina debtors and creditors would be wise to obtain counsel from an attorney with experience in bankruptcy and collections law.

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Heather Culp Speaking at Mecklenburg County Bar

Heather Culp — Tue, 28 Feb 2012 18:08:19 +0000

I enjoy my work with the Mecklenburg Bar, where I have served on the Continuing Legal Education Committee since 2007. In April, I will speak on a panel with other attorneys for a Continuing Legal Education course at the Mecklenburg County Bar. The session is entitled “Getting and Keeping the Clients You Want,” which brings up the topic for general discussion here on our site.

Yes, there are cases and clients we don’t want here at Mitchell & Culp, PLLC, primarily:

People who aren’t comfortable with transparency, because bankruptcy requires full disclosure of financial affairs.
People who can’t trust their attorneys, because we need free and full communication with our clients in order to represent them.
People who can’t listen, aren’t open to new ideas and ways of doing business, and/or can’t take advice – entrepreneurs, especially, tend to be risk-taking cowboys.

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Advice from Other NC Attorneys in the Bankruptcy Section

Heather Culp — Mon, 27 Feb 2012 15:08:12 +0000

Rick, Chris and I belong to the North Carolina Bar Association’s Bankruptcy Section, comprised of a great cross-section of bankruptcy practitioners across the state. One of its benefits is the section’s listserv, through which we became aware of the following items of interest to us and perhaps our clients:

Capital One is catching heat for allegedly trying to collect debts that were discharged through bankruptcy.
Through discussions about Wells Fargo’s practice of placing an administrative freeze on debtors’ bank accounts upon notice of a bankruptcy filing (even where Wells Fargo is not a creditor), I was reminded that credit unions can be a great alternative to banks.

Frank Drake, who represents creditors in his practice at Smith Debnam in Raleigh, suggested these credit unions for folks who want to start afresh in their banking and financial matters, and for those who looking for an alternative to big banks:

Self-Help CU
First Flight Federal
CU American Partners
FCU United Services Credit Union

Frank also suggested also checking at www.asmarterchoice.org for other credit unions in your neck of the North Carolina woods.

Be advised that we at Mitchell & Culp don’t have any relationship with these credit unions and are not familiar ourselves with their membership eligibility requirements.

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Charlotte’s Shadow Inventory: Homes in Foreclosure, Homes Underwater

Heather Culp — Fri, 17 Feb 2012 15:15:14 +0000

I see that writing about the mortgage meltdown isn't at all akin to beating a dead horse. Every day a new person needs this information

We’ve written extensively about the so-called mortgage meltdown, foreclosures and scams claiming to help underwater homeowners, but which too often make matters worse for people who are already struggling. Just when I think writing about it again is akin to beating a dead horse, I’m reminded that thousands of people are awakening to the inevitability that they will have to develop a strategy for coping with their real estate woes.

The Charlotte Observer recently interviewed my law partner, Rick Mitchell, about depressed home prices causing and contributing to a lot of the financial problems in the area.

In Mecklenburg County, the Carolina Multiple Listing Services had 7,887 homes on the market as of Oct. 31. But the Observer found far more in the shadows: an additional 16,800 distressed properties not counted among homes currently for sale.

In its analysis, the newspaper found:

About 13,000 Mecklenburg homes whose owners are more than 90 days delinquent. It is unclear how many of those are already in foreclosure, but experts say the majority are likely to be foreclosed on at some point.

More than 3,800 homes owned by lenders but not listed for sale. This interactive map shows 34,000 homes that are likely to come on the market.

As the article pointed out, “When shadow inventory comes on the market, it typically sells at a steep discount, depressing neighborhood values. It scares buyers and reduces demand. Because the housing market is such a key part of the broader economy, large amounts of shadow inventory can ultimately slow economic growth.”

If you are facing a possible foreclosure; if you cannot make both your first and second mortgage payments; if you need to sell your home but cannot do so because it is “under water” or if you foresee any of these circumstances in your possible future, contact a qualified bankruptcy law firm to strategize. This is called a “bankruptcy counseling session” and can sometimes help prevent filing for bankruptcy protection at all.

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