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San Francisco Bankruptcy Law Blog

Credit card debt and unexpected bills

A financial situation involving a substantial amount of credit card debt and little to no savings can be frustrating. When faced with unexpected expenses, California residents may question how they can afford necessary services for themselves and their family members.

The two most common unanticipated emergencies involve car repairs and medical costs. Because these two groups of expenses can be non-negotiable, a person with a lot of credit card debt may not have options for payment. Maxing out credit cards means that there is no credit line available, and if emergency savings are non-existent or not enough to cover the amount, a person may have no options for funding predictable situations.

Medical debt and bankruptcy options

California individuals who are facing medical debt are not alone. Almost half of all collections are for medical debts, and many Americans face lower credit ratings as a result. Some consumer advocates feel that medical debt is a poor assessor of risk and should not be included in credit reports, and while some reporting agencies are changing their policies in this regard, consumers must be vigilant about not letting this type of debt spiral out of control. A collections item can lower a FICO score by up to 100 points. However, debts under $100 do not affect the FICO score.

Another point consumers should keep in mind is that medical debt is often assigned incorrectly. One debt collection agency founder estimates that they receive incorrect medical bills about 20 percent of the time. For some, insurance should have covered the bill and did not. In other cases, patients are either being billed for things never received or overcharged.

RadioShack files for bankruptcy after 94 years

RadioShack stores have long been a familiar sight on the streets and in the shopping malls of California, but residents of the Golden State will soon have to look elsewhere when shopping for gadgets and electronic accessories. The niche retailer filed for bankruptcy protection on Feb. 5, which looks set to end an improbable 94-year run. The company thrived during the 1960s and 1970s as electronics became a key retail sector, but the Texas-based company has been unable to cope with the rise of e-commerce and the appeal of big-box retailers.

The business bankruptcy will see up to 2,400 of the company's 4,000 retail locations sold to Standard General. The private equity firm has revealed that it intends to convert 1,750 of the locations into Sprint outlets. RadioShack's CEO has announced that talks are underway to sell the firm's remaining assets. The filing in a Delaware court revealed that $1.38 billion is owed by the retailer to between 50,000 and 100,000 creditors.

CDC statistics paint a picture of medical debt in America

Readers in California may be interested in learning about data from the Centers for Disease Control and Prevention that illuminate the growing financial burden many Americans are facing when it comes to paying for hospital bills in recent years. Families with incomes that are either at or below 250 percent of the federal poverty line who also have children face the greatest difficulties in paying for hospital bills, according to the data, which was culled from the agency's National Health Interview Survey in 2012 and released in a 2014 report.

The survey involved conducting a series of interviews with different families to compile information about how challenging it is becoming for a variety of households to be able to cover their hospital bills. It found that whenever even one member of a household faces financial difficulty with medical expenses, the entire household could be at risk for experiencing the same financial difficulty. Households in which there were several different forms of insurance coverage and households that included one uninsured individual also face great difficulty in paying for their hospital bills.

Bankruptcy and paying discharged debts

Individuals in California who are declaring bankruptcy may wonder if they can still pay a discharged debt. They may wish to pay a debt if they feel personally responsible for it. For example, it might be a personal debt to a friend or family member or to a local business.

It is possible to repay a discharged debt after bankruptcy even if the creditor has no legal means of pursing the payment. However, after bankruptcy, an individual is not obligated to pay any debts that were discharged. If a creditor persists in trying to collect, the individual can report this to the court. There may be a fine if the creditor violates the court injunction.

Debtor rights against debt collectors

Many people who are delinquent on their debts in California are subjected to abusive and harassing debt collection practices by third parties who have either been retained by the original creditors to collect on the debts owed or who have purchased those obligations. People often receive repeated phone calls, and collectors will sometimes call at inconvenient hours and engage in other harassing practices. Victims of abusive third-party collections practices may have recourse, however.

The behavior of third-party debt collectors is regulated by the Fair Debt Collection Practices Act,, a federal law that prohibits a number of collection practices. Collectors are forbidden from making repeated phone calls, discussing the debtor's account with third parties, using abusive language, lying or threatening criminal prosecution. The law sets a statutory penalty of $1,000 for each violation committed by the offending party.

Are there any protections available for medical debt?

California residents may be interested in learning more about what action the state is taking to protect consumers from medical debt. A significant number of families are struggling with debt primarily due to their outstanding health care bills. The federal government has taken some steps to alleviate these hardships, but states have more power in protecting residents from over-aggressive collection practices. Many of the laws are designed to assist people who earn lower income, are uninsured or are underinsured.

The four types of state protections include protections against balance billing, hospital billing and financial assistance laws, legal agreements with hospitals about fair prices and debt collection and protections from certain collection practices of medical debt. Some of these laws are designed to prevent people from losing their homes due to outstanding medical expenses. The laws also regulate the manner in which patients may be billed by hospitals and out-of-state providers.

Bankruptcy agreement sends assets of Aereo Inc to auction

A high profile bankruptcy court ruling highlights legal challenges faced by the technology industry, especially in high tech San Francisco, California. The technology assets of Aereo Inc, a former internet video streaming company, are headed to the auction block. The ruling came from the U.S. Bankruptcy Court in Manhattan as part of an agreement with television broadcasters to sell Aereo's assets. The assets to be auctioned were used in its TV streaming service that was shut down for copyright violations.

A decision of the U.S. Supreme Court effectively ended the video streaming company's business. The court ruled that Aereo had violated the copyrights of broadcasters including CBS, ABC, NBC and Fox. Aereo had used antennas to receive television broadcasts and then stream the content on the Internet to subscribers for $8 to $12 a month. Aereo filed for bankruptcy in November, five months after the legal decision unraveled its business model.

Chapter 13 voluntary reorganization in California

People who are considering bankruptcy often do not understand the various chapters available to them. For some, a complete liquidation through chapter 7 makes the most sense. Others, however, may find it more beneficial for their particular case to proceed through a chapter 13 voluntary debt reorganization.

As opposed to a chapter 7 liquidation, the estate's assets are not liquidated in a voluntary reorganization. Instead, the individual debtor proposes a debt repayment plan. He or she will be required to make the payments according to the plan for a period of between three and five years. The proposed plan must be approved. After the petition is filed, the trustee will be appointed and the creditors notified. At the creditors' meeting, the creditors will have the ability to question the debtor under oath and to object to the plan.

How do federal statutes and re-aging relate to credit card debt?

Debtors in California may be interested in learning more about the federal laws governing credit card debt and re-aging. The Fair Debt Collection Practices Act establishes the mandates and the appropriate jurisdiction for how debt collectors collect outstanding balances or take legal action against debtors. Section 811 of federal law states that collection companies have the right to take legal action in the jurisdiction where the consumer authorized the agreement with their signature, or where the consumer resides.

In some contract agreements, credit card companies design the terms of service so the laws governing the agreement to be in the jurisdiction of the issuer instead of the consumer. If a creditor is successful with obtaining a favorable judgment for repayment of debt, the information may remain on the debtor's credit report for up to seven years. If the debtor files for bankruptcy, the information remains on the credit report for up to 10 years.