Last year an elderly relative had a stroke. She started her day fully capable and ended it needing 24-hour nursing care for the rest of her life. If you aren’t familiar with the costs of round-the-clock nursing home care, it can be $5,000.00 a month or more out-of-pocket after Medicare coverage expires. She needed Medicaid approval, so I helped her. Her case was an “easy” one because she has few assets and very little income. Still, it took months and two denials before I got her approved. Honestly, I don’t know how people do it without professional help.
I’ve learned that Medicaid approval is surprisingly difficult in Texas. I’m only half-joking when I say the process seems designed to get the applicant to give up. The rules are unclear and it is easy to make a mistake that leads to a denial. Virtually everyone starts the process with too much income, too many assets, and too large of a debt load. The road to approval often requires substantial pre-application planning. There are so many potential roadblocks that it makes sense to hire an attorney to navigate through the process.
So, I’ve expanded my practice to include helping Texas residents get Medicaid approval. This could be an elderly or disabled person who needs nursing home, institutional, or home care, or who works but needs help with medical expenses. Or, someone who needs help paying Medicare costs such as premiums, co-pays, or deductibles. Or, a parent with a disabled child who doesn’t qualify for traditional Medicaid because their income is too high.
If you or someone you know needs Medicaid assistance, here is where you can schedule a free telephone appointment with me. In most cases it doesn’t matter where they live in Texas. I don’t require office visits; we can take care of everything without the applicant leaving their home. In the consultation I will gather the facts and answer questions. Then, I will report back within 48 hours with a written report explaining what we need to do to get an approved application.
Finally, let me tell you what I charge for my services. When I helped my elderly relative, I consulted several attorneys who do this kind of work. I was surprised by how much money you can spend getting approved for Medicaid! She could not afford any of them, so I helped her. I don’t want my fees to be a surprise, so I’ll let you know that I currently charge a flat fee of $3,000.00 for this service. In some situations it makes sense to pay the full fee up front if it helps with an asset problem. Otherwise, I do offer a payment plan.
Suppose Big Bank Credit Card sues you and gets a judgment. A common question is, “so what”? Me and my clients live in Texas, and the general consensus is that Texas is difficult place to collect debts. So, what can a creditor really do to collect?
First, let’s consider the judgment. It is enforceable for up to 20 years. And, it usually grows at a standard interest rate between 5% and 15%. So, even if you think yourself judgment- proof now, what about 5, 10, or 20 years from now?
Second, let’s consider what you can expect a creditor to do to collect their judgment:
- Recorded in Land Records: This is the most common thing creditors will do to collect a judgment. Normally they file only in county where the lawsuit was filed. But, it could be filed in any (or all) Texas counties. With a little more work, it can be filed in counties in other states. Filing the judgment in land records basically creates a lien against real property in that county. They can’t force the sale of the land, but if you sell or inherit land in that county, then the creditor gets paid before you do. Your homestead is legally protected from this type collection, meaning you can sell your house without paying this lien. But, in reality it rarely works that way. You must take steps to actively protect your property at least months before it is sold. This happens rarely. And, no title company is going to issue a title policy when a lien is outstanding, so you are often faced with the choice of paying the lien or killing the sale. The rare super-aggressive creditor lawyer will do a little research and file a judgment in the county where the lawsuit was filed, any other county where you own real property, and the county where your parents live.
- Regular Contact and Settlement Offer: This is the second most common thing creditors do to collect judgments. Judgment creditors call and send letters trying to collect and offering settlements.
- Bank Account Garnishment: This is the third most common action a creditor takes to collect a judgment. It is easy for a creditor to find out where you bank and what day you get paid. From there, it is just a matter of timing to get approval to seize all the money in your bank account. Normally, this happens with no warning to you.
- Seizure and Auction: This is rare in credit card lawsuits less than $10,000.00. A judgment creditor can use a court order to make you tell them what you own. Then, they can have the sheriff seize property and sell it at auction. Some property is automatically protected, including most of the things people generally own. What isn’t protected? Cash, financial accounts, boats, excess vehicles, cell phones, computers, firearms (more than 2), investments, and land (not homestead). This is not an exclusive list.
- Wage Garnishment: This is rare in Texas and even rarer in credit card lawsuits. This takes a seriously aggressive attorney. Basically, the judgment creditor gets court permission to have your employer withhold a certain amount from each paycheck to pay the judgment. In Texas, a wage garnishment cannot happen if your paychecks come from Texas. But, 46 states allow wage garnishment. The exceptions are Texas, Pennsylvania, and both North and South Carolina. If your paychecks come from one of the 46 states that allow wage garnishments, your wages can be garnished.
- Receiver Appointed: This is rare in credit card lawsuits. As with seizure and wage garnishment, this takes a seriously aggressive attorney. That attorney would ask the judgment court to appoint a person called a Receiver to take over your life. You can’t do anything with your assets or your money without Receiver approval. You can’t even file bankruptcy without Receiver approval. This is the worst-case scenario for people with assets.
These are the risks you take when a creditor gets a judgment against you. Still feeling judgment-proof?
Generally speaking, two different kinds of credit-card related creditors file lawsuits. One type is the “Original Creditor”. As the name suggests, that’s who you borrowed the money from. The second type is a “Debt Buyer”. Again, as the name suggests, this is a business that purchased a debt. How I handle these cases is dependent on which type I’m up against.
Debt Buyers: This type of creditor bought the debt from the original creditor or from another debt buyer. Examples include Midland Funding, Asset Acceptance, Portfolio Recovery Associates, and CACH LLC. To win a lawsuit, they need to prove they own the debt and that the person they sued owes the debt. This can be difficult if they don’t have the right evidence. So, it often makes sense to fight these lawsuits.
Original Creditors: This type of creditor loaned the money they are trying to collect. Examples included Capital One, American Express, Discover, and GE Capital (now Synchrony Bank). To win the lawsuit, they need to prove they own the debt and that the person they sued owes the debt. This is usually fairly easy for the original creditor. So, it doesn’t make financial sense to spend money fighting original creditors. They will usually settle for a percentage of the balance they claim is due. Spend too much fighting the lawsuit and you can quickly get to the point where your attorney fees plus the settlement amount equals more than the full balance the creditor sued you for!
A Chapter 13 bankruptcy is essentially a debt settlement and reorganization program. What separates it from debt settlement businesses is the enforcement power it provides. Debt settlement, credit repair, and mortgage modification businesses rely on good faith and negotiation with creditors. Bankruptcy is Federal Law enforced by Federal Judges in Federal Courts. The Chapter 13 Trustee is part of the United States Department of Justice.
Chapter 13 bankruptcy stops your creditors from collection attempts. What does that mean for you? It means lawsuits are stopped cold. It means collectors stop calling you three times a day. Credit card bills stop. So do medical collectors. And the IRS. And the repo man. And payday loans. And foreclosures. And past-due child support collection. And mostly everyone else you owe money*. The phone stops ringing. The debt stops growing. Life starts getting back to normal.
A Chapter 13 bankruptcy starts by filing bankruptcy paperwork with the local bankruptcy court. The person filing the bankruptcy is called the “debtor”. Soon after the bankruptcy is filed, the court clerk will send notice out to all the debtor’s creditors.
The court clerk will also set a date and time for a creditor meeting. The debtor and debtor’s attorney attend this meeting at the Chapter 13 Trustee’s office. It is usually about 30 days after the bankruptcy is filed. It is rare for creditors to attend. It is generally an opportunity for the Trustee to take testimony and verify that the information in the bankruptcy paperwork is correct.
The debtor starts making payments to the Trustee 30 days after the bankruptcy is filed. The payment amount is determined by the debtor and attorney, usually before the bankruptcy is filed. The Trustee takes the payment and distributes the money to the creditors that need to be paid through the bankruptcy.
The debtor makes payments for 36-60 months. At the end of the bankruptcy, the debtor is current on the debts that needed to be paid. Everything else is wiped out. A normal repayment plan wipes out your unsecured debt (credit cards, medical bills, etc.), pays most of your attorney fees, and pays important past-due debts (mortgage, recent taxes, child support, vehicle payments, etc.).
A Chapter 13 bankruptcy can be a good option for someone who is
- threatened with foreclosure on their homestead
- significantly upside down on a car they purchased more than 30 months ago
- burdened by a federal tax lien larger than their combined assets
- behind on child support
- carrying more credit card debt than they can pay over the next 3 years
- able to make their regular mortgage payment and living expenses, but can’t catch up on the past due amounts.
The explanation above is simplified. A Chapter 13 bankruptcy is actually a complicated legal proceeding. And, the rules vary from Trustee to Trustee. In the area I practice (Dallas / Fort Worth) a Chapter 13 bankruptcy can be assigned to the Dallas Trustee (in Irving), the Plano Trustee, or one of two Fort Worth Trustees (both in North Richland Hills). Which of these will force you to make your trustee payments by wage withholding? Which will let you keep your tax refund? Which will soon require conduit mortgage payments? I do not recommend you try a Chapter 13 without an experienced attorney.
Thanks for reading;
*Note that I said “mostly everyone else you owe money”. Some creditors aren’t affected by a Chapter 13 bankruptcy. The most common is a landlord attempting to evict. If a landlord has an eviction judgment before a bankruptcy is filed, bankruptcy will not stop the eviction. Criminal proceedings (including “hot check” prosecutions”) are not stopped by a bankruptcy. And, some court proceedings or license restrictions regarding paternity, child support, divorce, and domestic violence aren’t stopped by bankruptcy. Most of the rest of the exceptions are rare in consumer bankruptcies, so we won’t go into them here.
A Chapter 7 bankruptcy stops your creditors from collection attempts. What does that mean for you? It means lawsuits are stopped cold. It means collectors stop calling you three times a day. Credit card bills stop. So do medical collectors. And payday loans. And mostly everyone else you owe money* The phone stops ringing. The debt stops growing. Life starts getting back to normal.
A Chapter 7 bankruptcy is essentially a debt eraser. The basic idea behind a Chapter 7 bankruptcy is that the debtor surrenders non-exempt property to a Trustee, who liquidates it and distributes it equally amongst creditors. In exchange, the Debtor gets all his unpaid debts wiped out.
If that makes sense to you, you’re probably a bankruptcy attorney. Everyone else, please keep reading.
A Chapter 7 bankruptcy starts by filing bankruptcy paperwork with the local federal bankruptcy court. The person filing the bankruptcy is called the “debtor”. The bankruptcy paperwork will include a list of everything the debtor owns, everything the debtor believes he has a legal right to keep, everyone the debtor owes money, the debtor’s income and expenses, and other personal and financial information.
Soon after the bankruptcy is filed, the court clerk will assign a person to oversee the bankruptcy (the Trustee), set a date and time for a creditor meeting, and send notice out to all the debtor’s creditors. The debtor and debtor’s attorney attend the creditor meeting together at the Trustee’s meeting location. It is usually about 30 days after the bankruptcy is filed. It is rare for creditors to attend. It is generally just an opportunity for the Trustee to take testimony and verify that the information in the bankruptcy paperwork is correct.
A Chapter 7 bankruptcy is normally finished about 60 days after the creditor meeting. That’s when the Judge signs the “Discharge Order” that officially wipes out the debtor’s responsibility for any debts not reaffirmed (see more about that below).
The explanation above is simplified. A Chapter 7 bankruptcy is actually a complicated legal proceeding. If you file bankruptcy but don’t qualify, you risk having a dismissed bankruptcy on your credit report. If you make a mistake and don’t protect your stuff, you risk losing it. Once you file, you can’t just change your mind and stop the bankruptcy. Mistakes can be permanent. I do not recommend you try a Chapter 7 without an experienced attorney.
Here are answers to some of the common questions I see in Chapter 7 bankruptcies…
“Will I get to keep my stuff”? In most cases, yes. Your bankruptcy paperwork contains two important lists. The first is a list of everything you own, including houses, cars, boats, cash, financial accounts, legal claims, tax refunds, vacation homes, jewelry, firearms, household goods and furnishings, clothes, and more. The second is a list of everything you claim to have a legal right to keep. Anything that isn’t on the second list needs to be turned over to the Trustee. Texas is a very friendly state for bankruptcy filers because Texas laws are generous with letting you keep stuff. But, it is very easy to mess it up if you don’t know what you are doing. With the help of an experienced bankruptcy attorney, most people in Texas can make the right choices and keep their property. And, knowing what you are keeping and not keeping is something you should be fully aware of before the bankruptcy is filed.
“Can I choose which debts are included in my bankruptcy”? No. You are required to list all your debts. Mortgages, vehicle loans, credit cards, medical bills, past due utilities, tax debt, that money Aunt Peggy loaned you; all of it must be listed. Some of it you may keep paying, but all of it must be listed.
“What if I want to keep paying my mortgage and car loan; I don’t want to lose my house and car”? Usually not a problem. Your income and expenses are listed in your bankruptcy paperwork. If that paperwork shows you can afford the monthly payment and you are not currently behind on that monthly payment, you should have no problem “reaffirming” that debt. Without going into complicated detail, that basically means everything stays like it was with your mortgage or auto loan before you filed bankruptcy. Whether or not it is necessary or a good idea is too complicated to cover here.
“What if I want to keep paying a credit card”? Nobody is going to stop you from paying creditors after the bankruptcy. But, if you want to pay a creditor because you want to keep that account open, that’s not going to happen. Most major creditors will cancel a credit card before they even receive official notice.
“Does a Chapter 7 wipe out all my debt”? Not necessarily. As the laws are currently interpreted in Texas, student loans almost always survive a bankruptcy. If your story makes me cry, we might consider attempting to wipe out student loans. Otherwise, it is a waste of your money to try. Some IRS debt survives the bankruptcy, and we can normally know whether it does or doesn’t before we even file the bankruptcy. Child support survives a bankruptcy. As does criminal restitution and some fraudulent activity. That’s not the entire list, but those are the most common.
“Can anybody file a Chapter 7 bankruptcy”? Anyone can file a chapter 7 bankruptcy, but if you do not qualify it will be dismissed. That’s normally a bad thing. Qualifying is based on an income and expense test way to complicated to explain here. There is also the issue of whether you should file a Chapter 7, even if you qualify. For example, if you are behind on your mortgage or car payments and want to keep them, a Chapter 7 might not be your best solution.
“How long will my credit be ruined”? As long as you let it be. If you follow my instructions on credit rebuilding after bankruptcy, your credit scores will dramatically improve within 12-18 months after the bankruptcy is filed and the bankruptcy will have virtually no effect on your credit scores 3 years after filing. Ignore my instructions and a bankruptcy can haunt your credit scores for years. I agree with Dave Ramsey that life is better when you’re debt-free. But, life is also better when you have nice credit scores, and you can’t do that without wisely using credit. As for credit availability, most new and used car dealers have financing available for people 90-100 days after the bankruptcy is filed. Not 0% interest, but not as bad as you might think. Multiple unsecured credit card providers will happily extend you credit about 120-150 days after the bankruptcy filing. The bankruptcy won’t matter for home financing about 2 years after the bankruptcy filing.
Thanks for reading;
*Note that I said “mostly everyone else you owe money”. Some creditors aren’t affected by a Chapter 7 bankruptcy. The most common is a landlord attempting to evict. If a landlord has an eviction judgment before a bankruptcy is filed, bankruptcy will not stop the eviction. Criminal proceedings (including “hot check” prosecutions”) are not stopped by a bankruptcy. And, some court proceedings or license restrictions regarding paternity, child support, divorce, and domestic violence aren’t stopped by bankruptcy. Foreclosures and repossessions are halted,but in many cases only temporarily. Most of the rest of the exceptions are rare in consumer bankruptcies, so we won’t go into them here.