Expert: Terry Leeders - 3/23/2008

Question
QUESTION: Hello Terry, my name is John, I am 46 years old and am on disibility, have been since 1999. I receive Social Security Disibility Insurance (SSDI). I currently live in Phoenix Arizona. I am a San Diego native, have lived in Phoenix since March 2004. I filed for Chapter 7 Bankruptcy in 2003, my last year living in San Diego. Alot of unpaid medical bills and credit card bills. It was successfully discharged in Jan. 2004. Although on SSDI, I never signed up for Medicare Part B, could not afford it, I have just signed up for it, it goes into affect in July 2008, had no choice. In the four years I have lived out here I have been hospitilized four times, the last time was Jan. 2008 for emergency gallbladder surgery. My disibilities are numerous, I suffer from depression, anxiety, I had major stomach surgery in 1985 that left me with permanent side effects, I have severe osteoperosis in my right hip which may require surgery. I receive approx. $1,627 per month on disibility, that will be reduced by $170.00 per month for Medicare Part B in July 2008. The four hospital visits have left me with bills exceding $20,000. I have three credit cards which total approx. $6,000, they have all been "cut-off". My credit is so bad that one of the credit bureau's has me listed as deceased. I am so financially strapped that I will be selling my car to a wholesale company this week, its that or abandon my apartment and live in my car. I do not qualify for ANY state assitance, I have been applying since I moved here in March 2004, I even wrote a letter to the Govenor to no avail. I consulted with a Chapter 13 Bankruptcy attorney several weeks ago, knowing that I cannot file for a Chapter 7 till 2012. My attorney in San Diego was very knowledgable, he told me banruptcy laws were changing to make it harder for debt to be discharged. I always thought Chapter 13 was a re-payment plan. The attorney I consulted with said my debts, medical and credit card debt would be discharged after making payments for 3-5 years. His fee is $3,500. If Chapter 13 is a re-payment plan, and laws have been passed making it harder to discharge debt, I don't understand how my debt could be "discharged". He said its because my debts are "unsecured". He said my monthly re-payment plan would be approx. $100.00 per month for a minimum of three years. Thats enough to re-pay his fee. Is he feeding me a line of B.S.?

ANSWER: Your attorney may be suggesting a 10% repayment plan.  This would 'discharge' 100% of the unsecured debt.  So, even with a large amount of debt, 10% would be able to pay back in a shorter period of time.  His #s seem to be in line, athough the plan may run a little longer than that.

---------- FOLLOW-UP ----------

QUESTION: Hello Terry, thank you for your response. Yes, he said the re-payment plan could take 5 years, I would assume this is the case, since three years would only cover his fee. Do you think it wise if I try to wait till 2012 and file a Chapter 7? Everything I have read about Chapter 13 says it is a mistake for the consumer. Again, thank you for your time.

ANSWER: 80% of the plans I draft are 60 month plans.  You need to determine if you can really afford the monthly payment for that time.  IF you can, then there is no matter waiting, I would get the relief right away.  If you don't have any pressure from the creditors-they can call, they can sue you, freeze your bank account, garnish wages if you work etc.  Those are the risks you take by waiting 4 more years.

---------- FOLLOW-UP ----------

QUESTION: Hello Terry, the attorney I saw did not say anything about my bank account being froze. He said as far as my creditors, medical bills and credit cards- he said since my only income is SSDI, that I was "judgement proof" from any lawsuit. I do not want to wait four years, I have enough health problems and I don't need the added stress. I just want to make sure that the lawyer I retain is competant. That is why I am selling my car, that will free up monthly income that could go toward payments on a 60 month plan. Thank you, John~

Answer
Those are just a list of things that a creditor might do, in general.  Of course, they would have to sue you first before they can garnish of freeze a bank account.  once you file though, you are protected and they cannot do that. Best of luck to you.