America may be a world leader in many areas, but healthcare affordability is not one of them. According to a recent survey conducted by Health Affairs, American adults, more than the citizens of any other industrialized nation, avoid critical healthcare because of the high cost of coverage.

This comes as no surprise to bankruptcy lawyers, and certainly not to those who have filed for Chapter 7 bankruptcy relief due to unavoidable medical bills.

Health Affairs’ survey revealed several interesting facts—

• one-third of American adults neglected recommended medical care when obviously ill (whereas in Germany, only one quarter of adults went without care.)
• one-fifth of Americans reported having trouble paying off medical bills (barely 10% of Europeans and Canadians cited similar troubles.
• almost one-third of Americans surveyed agreed on the confusing nature of insurance policies and documentation.
• America reported the widest margins relative to available healthcare between income levels, with the poorest citizens receiving the least care.

Most of my clients have at least some medical debt at the time I file their bankruptcy petition.  For some, it is the primary reason they need to file for bankruptcy relief.  Many had either no health insurance, or poor coverage, at the time of a major illness or accident.  I’ve seen medical bills range from a few thousand dollars, to hospitalizations costing over $ 100,000.

If you face a mountain of unpayable medical debt, give me a call.  I can advise whether it makes sense to file for bankruptcy in your particular situation.

Mark Buckley is a Rhode Island bankruptcy lawyer and the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call Mark with your questions at (401) 467-6800.

Below are the median income figures that I use for my Rhode Island clients who need to file for bankruptcy protection:

• 1 person household $ 45,945 (down from $ 47,798)
• 2 person household $ 60,538 (down from $ 61,506)
• 3 person household $ 75,306 (up from $ 68,909)
• 4 person household $ 82,086 (down from $ 88,990)
• Add $ 7,500 for each additional household member above a 4 person household

As a reminder, these are gross income figures.  To determine whether you qualify for Chapter 7 bankruptcy relief, we take your trailing 6 months of gross income from all sources (except Social Security and unemployment benefits), multiply it by two and then compare it to the chart above.

While its easier to qualify for a Chapter 7 bankruptcy with gross income lower than the median, in many cases, you may still qualify with income slightly higher than the median.

Bottom line: Its impossible to forecast whether it will become easier or more difficult to file your Chapter 7 case in the future.  Even if you are not ready to file your case now, I can run an analysis on your family’s income to see if your income is presently low enough to qualify for debt relief.

Mark Buckley is a Rhode Island bankruptcy lawyer and the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call Mark with your questions at (401) 467-6800.

Below are the new median income figures that I will use for my Rhode Island clients who need to file for bankruptcy:

• 1 person household $ 47,798 (up from $ 46,335)
• 2 person household $ 61,506 (up from $ 59,624)
• 3 person household $ 68,909 (up from $ 66,800)
• 4 person household $ 88,990 (up from $ 86,267)
• Add $ 7,500 for each additional household member above a 4 person household

As a reminder, these are gross income figures.  To determine whether you qualify for Chapter 7 bankruptcy relief, I will examine your trailing 6 months of gross income from all sources, except Social Security and unemployment.  I will then double the gross figure and compare it to the chart above.

Bottom line: Many more who need to file for bankruptcy protection in Rhode Island now qualify.  This window of opportunity may only be available for a short period, so if you are considering bankruptcy, call a qualified RI bankruptcy attorney today.

Mark Buckley is a Rhode Island bankruptcy lawyer and the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call Mark with your questions at (401) 467-6800.

1. Time—A normal Chapter 7 bankruptcy case takes about 100 days from beginning to end. After a brief creditor’s meeting one month into the process, the case ends two months later.
2. Property—Because federal and/or State exemption laws allow a debtor to protect their assets, most Chapter 7 filers do not lose any property. The bankruptcy trustee handles most cases as “no asset” cases, meaning that the debtor is not required to forfeit any property.
3. Cost—Filing under Chapter 7 is considerable cheaper than filing under Chapter 13.  Even though lawyer fees may differ from state to state, most bankruptcy attorneys will quote a fee that is fair and affordable. Bankruptcy lawyers who practice exclusively in bankruptcy (not general practitioners) understand you don’t have extra money to overpay for their services.
4. Repayment—You are not required to repay unsecured non-priority creditors like credit cards, utility bills, personal loans, or medical bills. If you created your debt in good faith and no creditor objects to your bankruptcy, most unsecured credit obligations will be destroyed in your bankruptcy.
5. Privacy—Record of your bankruptcy is only accessible in the court system. In most cases, the only people who will know you filed for bankruptcy protection are you, the court, and your creditors.
6. Credit—Most people who file under Chapter 7 can reestablish credit shortly after their bankruptcy concludes. (Your debt to income ratio improves once your debt has been eliminated: the first step towards rebuilding your credit.)
7. Stress—Most chapter 7 filers never set foot in a courtroom.   Instead, they merely attend a brief, informal hearing with the trustee assigned to their case.

Mark Buckley is a Rhode Island bankruptcy lawyer and the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call Mark with your questions at (401) 467-6800.

If you’re trying to decide which approach to bankruptcy is best for you, the prospect of writing off a second mortgage can be a powerful reason to consider filing Chapter 13.

Chapter 13 carries certain disadvantages for consumer debtors as compared with Chapter 7.  The fees are higher, the bankruptcy case continues for years instead of months, and the debtor usually has to pay some creditors who might get nothing if he filed Chapter 7.  So there has to be a good reason to choose Chapter 13.

Traditionally the most common reason is that Chapter 13 lets debtors catch up with delinquent mortgage payments in an orderly way.  But with real estate values down an average of 30% over the last few years, an increasingly common reason to file Chapter 13 is to strip off an “underwater” second (or third) mortgage.

Let’s start by looking at how secured debts are treated in bankruptcy.  In Chapter 7, for the most part, secured debts pass through unaffected.  If you have two mortgages when you file Chapter 7, you will almost always have two mortgages when you finish your case.  You cannot strip off a mortgage in Chapter 7.

By comparison, in Chapter 13, secured debts generally are paid in full.  But unsecured creditors are often paid a nominal amount, possibly as low as one to two percent of their claims.  If a debt can be classified as unsecured, the debtor can likely eliminate it with a minimal payment.

Now, we typically think of a mortgage as a classic secured debt, because the creditor has a lien on the home or other real estate to secure payment.  But the Bankruptcy Code has a special definition of secured debts.  Under Section 506, a debt is secured only to the extent of the value of the collateral.  So if I own a TV worth $200 but owe $300 on the TV, the creditor has a secured claim of $200 and an unsecured claim for the remaining $100.  We refer to this as bifurcating the claim or “cramdown.”

With home mortgages, it works a little differently.  In order to encourage mortgage lending, Congress has decreed that first mortgages on residential real estate cannot be crammed down.  So while Chapter 13 can help you catch up with a first mortgage if you are behind, it cannot reduce the total amount required to pay off the mortgage debt.

The situation can be different for second mortgages.  If the value of the property is less than the payoff on the first mortgage, the second mortgage has no remaining value to “attach to.”  In effect, the first mortgage eats up all the value of the property, leaving none for the second.  In this situation, the second mortgage can be classified as fully unsecured.  This means the debt to the second mortgage holder, like any other unsecured debt, can be discharged, usually with only a nominal payment.  We refer to this as stripping off the second mortgage.

To illustrate how this works, let’s say you have a first mortgage with a balance of $100,000 and a second of $40,000.  If your home is worth less than $100,000, your Chapter 13 plan can classify the second mortgage as an unsecured debt and usually pay it off at pennies on the dollar, because the first mortgage eats up all the value in the home.  But if your home is worth $100,001, the entire second mortgage survives and must be paid in full.

Because determining real estate values is not a precise matter, it is not always possible to tell for sure whether a stripoff will succeed.  But the potential upside is tremendous: the debtor can emerge from Chapter 13 after three to five years with only one mortgage instead of two, and without paying a substantial amount on the second.  It’s an opportunity you will want to discuss with your RI bankruptcy attorney if your second (or third) mortgage may be underwater.

One last wrinkle.  If the value of the property is more than the first mortgage payoff  – even if only a few dollars – this leaves some value in the property that the second mortgage can attach to.  The second mortgage then gets the same protection as the first.  It must be paid in full.  It’s an all-or-nothing proposition.  Any value beyond the first mortgage means the second mortgage survives.

Mark Buckley is a Rhode Island bankruptcy lawyer and   the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL   PLANNER professional.  If you live in Rhode Island and have debt   problems, call Mark at (401) 467-6800.

Could the Obama Administration’s program to help American homeowners stay afloat be nearing the end of its usefulness? A committee of Washington Republicans assigned to oversee White House programs says this could be the case.

Soon after it became obvious that a major national financial crisis was looming on the horizon, the Obama Administration launched its Home Affordable Modification Program (HAMP), offering mortgage lenders financial incentive to restructure their customers’ payment plans. Although optimists predicted this program would stem the tide of sub-prime mortgage failures, it only ended up being temporarily effective: confusing paperwork, uninformed staffs, and poorly organized processes hopelessly confounded a large number of participants, many of whom ultimately failed to acquire long-term mortgage modification.

Newly elected Republican officials are expected to study and scrutinize many of the President’s recession-protection strategies, and thanks to its less-than-stellar performance, HAMP will probably make an easy target. “This program seems to have outlived its usefulness,” stated Darell Issa of the House Oversight and Government Reform Committee. In Issa’s opinion, the incentive program is yet another example of superfluous government intervention.

This allegation is not entirely without basis in reality. Although hopes ran high for HAMP, in truth the entire program was rushed and poorly planned from the beginning. Of the 500,000 homeowners granted temporary mortgage modifications under HAMP, only a miniscule fraction was approved for permanent modifications. In the long run, this left many further behind on their mortgage than they began.

Additionally, recent unemployment rates have been less than conducive for HAMP’s success. In recent years it has become impossible for much of the country to attain income levels capable of handling modified mortgages, let alone unadjusted ones.

The fact that HAMP has been associated with the robo-signing controversy only compounds problems. Republicans now blame Democratic regulators for not paying close enough attention to the foreclosure industry.  Representative Robert Goodlatte is quoted in a recent hearing on Capitol Hill as demanding Democrats to “explain how the OCC [the agency in charge of overseeing the activity of America’s largest banks] …failed to detect that there were foreclosure documentation issues well before this turned into a crisis.”

Julie Williams, Chief counsel for the OCC, had little to say in response: “In hindsight, if we think about the volume of transactions that were going through the process, we could have been more suspicious.”

Mark Buckley is a Rhode Island bankruptcy lawyer and CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, including problems with your mortgage, call Attorney Buckley at (401) 467-6800.

A successful Chapter 7 bankruptcy requires honesty in order to work. When filing for bankruptcy in Rhode Island (or any state for that matter), honesty is not just necessary: it is mandatory. Anyone filing for bankruptcy should know that they are expected—required, rather—to act in good faith and be completely transparent with their RI bankruptcy attorney and Chapter 7 bankruptcy trustee.

There are three areas in particular where this “duty to disclose” comes into play for those filing for bankruptcy.

(1) Duty to Disclose Pre-Bankruptcy Asset Transfers

Imagine you own a number of expensive assets (real estate, valuable jewelry, multiple cars, perhaps a boat) but have created considerable debt in acquiring them. Scared that you may lose something, you secretly transfer these items to a close relative before filing for bankruptcy, with the intent of taking them back after your debt has been eliminated. This would be considered fraud under bankruptcy law and could be grounds for the denial of your debt discharge. For this reason, you are required to alert your attorney of any and all transfers of interest in the period before you filed for bankruptcy.

(2) Duty to Disclose Payments Made Before Your Bankruptcy

You may or may not have been advised to avoid repaying loans to family and friends prior to filing for bankruptcy. This is partially because of your “duty to disclose” pre-bankruptcy payments, since repaying loans from family and friends in this context can also be considered as fraudulent. In repaying old debts, you have chosen a lesser priority “creditor” over another higher-priority creditor, an action that can have serious repercussions in bankruptcy court. For this reason, any pre-bankruptcy payments beyond what bankruptcy court considers “essential” must be disclosed to one’s bankruptcy attorney.

(3) Duty to Disclose Any Lawsuits

Your “duty to disclose” extends to payments you expect to receive as well. If you are currently involved in a lawsuit from which you expect to receive some form of financial settlement or compensation, you have an obligation to alert your bankruptcy attorney of your situation.

Bankruptcy is a complicated business, so consulting a qualified bankruptcy attorney is an intelligent move for any person struggling with excessive debt. A good bankruptcy attorney can help you make sense of bankruptcy law’s complex procedures and make the most of a difficult financial situation. The Law Offices of Mark Buckley offer free debt consultation and are a good place to start when looking for financial direction.

This may sound self-serving coming from someone who has helped more than 3,000 clients in Rhode Island file for bankruptcy relief, but ask anyone who has filed a Chapter 7 bankruptcy.  Most debtors waste time and money on weak attempts to solve an unfixable mess.

Recently, I spoke to married gentleman who hadn’t saved much for retirement.  He sold his house a few years ago and put the $ 120,000 profit in the bank, hoping it would supplement the $ 40,000 kept in a 401k plan.

Over the years, he spent $ 80,000 of his precious savings and all of his 401k in order to pay substantial credit card debt.  He still owes $ 37,000 and asked me if he could NOW file a Chapter 7 bankruptcy to discharge the remaining debt.

Under federal bankruptcy protection laws, he would have difficulty protecting his remaining $ 40,000 in the bank.  Because the account is joint, he may be able to protect half, but the rest is fair game for the bankruptcy trustee to go after.  Now in his 70′s, there is no way this retired man could afford to lose $ 20,000.

What went wrong?  What should he have done?

If he had called me years ago, I would have explained how under Rhode Island law, he could have exempted all the equity in his modest home and still file bankruptcy to discharge his considerable credit card debt.  I would have also explained how it almost never makes sense to liquidate qualified retirement assets to pay credit card obligations.  Instead of taking a 10% penality on the early withdrawal, paying income tax on the gain, and forfeiting the future growth of the account, he should have known that bankruptcy exemption laws are quite generous in protecting retirement assets.

In other words, he could have kept his house and retirement account and discharged all his credit card debt . . .  with ease!

It is unfortunate that he spent most of his life savings on debt that could have been eliminated with a simple Chapter 7 bankruptcy filing.

Here is my point.  You may never want to, or need to, file for bankruptcy relief.  But you should talk with a skilled bankruptcy lawyer who can explain all of your debt options.

So, when do you know its time to seek help? Do you have more than $10,000 in unsecured debt, are you robbing Peter to pay Paul, are debt collectors calling you at home or at work?  If so, something is seriously wrong.

Bottom line:  You would be surprised what you could learn from sitting with a qualified bankruptcy attorney.  A good bankruptcy lawyer can offer a free consultation and patiently explain all of your debt-relief options.

Mark Buckley is a Rhode Island bankruptcy lawyer and the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call Mark at (401) 467-6800.

You may have been advised by experts to pay off high-interest debt before other expenses. In most cases, this advice is quite sound; however, did you know that there are certain times in which it is best to pay off debts with lower interest rates first?  Don’t exhaust your limited resources without first prioritizing your debt obligations.

NerdWallet financial expert Tim Chen says, “When you have several different types of debts and your income isn’t quite keeping up with your total expenses, it can be tough to figure which debts to pay first. Ignoring high priority debts and focusing on less important ones may ultimately leave you in a worse situation than you were before. It’s often helpful for many people to have a table that lists their debts in order of highest priority to lowest.”

Here are some tips to help you re-prioritize your personal expenses?

First, start with secured debts—debts associated with assets that can be repossessed or otherwise seized. Your car and your house keep you moving, protected, and able to look for work, and as such they should be your first priority as far as protection is concerned. In the event that paying for even these most basic of priorities becomes untenable, Chapter 13 bankruptcy offers makes it possible to re-sort your finances, restructure your payments, and satisfy your creditors.

Deal with debts that can result in serious penalties second. Failing to pay off certain kinds of debt can result in serious penalties (including prison time.) Clearly, it is best to resolve these financial shortcomings as soon as possible.

The next debts to clear are those for services that require continued use. There are certain services that we simply cannot do without—electricity, running water, medical aid in the event of injury. Failing to recompense your doctor for his services will probably require you to find another, and late payment on utilities bring financial penalties with them. Although increasing numbers of doctors and utilities are willing to work with you on payment plans during these difficult economic times, you need to try to pay off debts associated with these services in a timely manner.

Finally, leave your unsecured debts (debts with no assets backing them) for last. Although the creditors of these debts may harass you while you make more pressing payments, they are unlikely—and in many cases unable—to repossess your property and more willing to work something out with you. If you still can’t cover your credit card debt after eliminating the first three varieties of debt, you should probably consider filing for Chapter 7 bankruptcy, which removes unsecured debt in order to allow you time to save for higher priority expenses.

If you are one of the millions of Americans in financial trouble, consult a qualified bankruptcy attorney.

Mark Buckley is a Rhode Island bankruptcy lawyer and the only RI bankruptcy attorney who is also a CERTIFIED FINANCIAL PLANNER professional.  If you live in Rhode Island and have debt problems, call Mark at (401) 467-6800.