Sometimes a person who experiences a tragic loss by and through a personal injury case or the medical negligence of a doctor or hospital has racked up tens of thousands of dollars in medical bills and credit card debt. You have lost income, have not been able to work…things are bad. Any lawyer with a heart is going to feel compassion for a client who may come to them and ask if there is something they can do to help, such as an advance on their case.
A lawyer is prevented from paying your medical bills and forwarding you an advance on your personal injury case. It presents an ethical conflict, as now they have a monetary interest beyond ordinary expenses and disbursements related to your personal injury case. It cannot be done.
Often we hear ads on pre-settlement funding and I do not believe this is an appropriate option. The interest rate these pre-settlement funders charge is too high.
The next logical solution that comes to mind would be filing for Chapter 7 bankruptcy to eliminate all the debt that you have accumulated related to your personal injury. Sadly this is not a solution and let’s explore why. For those of you who do not know a Chapter 7 is a total liquidation of your debt. It’s a clean slate…
To qualify for a Chapter & bankruptcy you should not have more than about 10 thousand dollars in personal assets. (It should be noted some assets are protected such as retirement savings or a homestead exemption in NYS for any equity that you may have accumulated in your home which only if my memory serves me correctly is 50 thousand dollars.) The 10 thousand dollars includes everything you own in this analysis. While there is no cut off of income per se that disqualifies you for a Chapter 7, I have found that persons with more than 65 thousand dollars are sometimes not able to pass what is called the Means Test for our region. This basically factors your income and budget, and residual income that could be available for paying your creditors. L
So even if you qualify for a Chapter 7 total liquidation of your debt…J there remains a problem that you cannot overcome. L Once the Chapter 7 Petition is filed you then in about one or two months have a 341 Hearing with the Bankruptcy Trustee. This hearing is usually held in a relatively small public space where there are other persons waiting for their Petition to be heard and it is recorded.
The Trustee’s job is to determine the truthfulness of your Petition. Your income, assets, schedule of listed debts. The Trustee will explore other possible assets that you now have or may have in the future. They may ask if you have a safety deposit box, do you have any inheritances coming to you, and a question I have often seen is that the Trustee will ask if you have a personal injury case pending. If you do then the Trustee will want more information about this case; the nature of the injury and potential value of the injury.
Depending on the value of the case (I have not checked recently but if memory serves me correctly only $7500 dollars of a personal injury or medical malpractice case is protected income from creditors.) If your case has significant value then, what will happen is that the Trustee may put a long adjournment to the Petition until the case is settled. Your creditors will stop harassing you, because the Chapter 7 has stayed collection activities and they were notified through a mailing of the 341 hearing, but this is a poor ultimate solution to the problem, if you find that your personal injury proceeds go to pay in large measure your creditors. This is particularly true when the money you potentially can receive is tax free because it is derived from a personal injury or medical malpractice case.
If you have no income, because of a negligent injury that has a case pending and you are being harassed by creditors and a plethora of collection calls this is what you can do:
- Stop paying your creditors – and use your meager monetary resources for life’s essentials, rent, food, and medicine.
- Get the name address of each creditor who writes to you or calls you.
- Get the account number of each creditor who writes to you or calls you (remember not to tell them why you want the information until you have the information.) Once you have this information tell them to note their account that you want them to cease and desist all collection activities.
- Send each creditor a letter that reads as follows:
- Cease and Desist All Collection Activities I do not want to hear from you by telephone, mail, or third persons, if you do so you will be violating the FDCPA (Fair Debt Collections, Practices, Act), and if you do I will report you to the NYS attorney general consumer division.
- This letter should be copied and sent certified mail with a return receipt.
- Do it each time the debt is sold to a new creditor or collection agency for collection (this happens alot.)
- Do the cease and desist letter each time it is ignored and address it to the collections manager.
The calls will stop. If they do not stop then notify the attorney general.
The drawback to this is that you may get a law suit handed to in person or pasted on your door. Most often, unless it is a housing matter that you owe money on, creditors do not bring in a witness (landlords usually do.) You have the right to a trial. If the creditor does not produce a witness the case will be dismissed. These pro se cases (meaning people who represent themselves) are brought in Civil Court of the City of New York. Do not ignore a law suit if you get sued. The Civil Courts are very user pro se friendly. The clerk will tell you how to file your answer. When you appear in the pro se trial ready part you are in control. If you can afford something and want to try to pay this debt then offer only what you can afford and try to get the debt reduced considerably. Remember you have leverage, because if you stand by your desire for a trial, for one reason or another, you will probably prevail. Always be honest when you appear before the judge or give testimony at trial. But you can always dispute the accounting of the debt, and make them bring in a witness.
If you negotiate with the lawyer for the creditor do not give them any information about where you worked or work etc…pay only what you can afford to pay monthly at a principal balance that is reduced and discounted for interests, costs, and fees…at the very least….
While nothing is a perfect solution to lost income…If you are reading this and have suffered from a personal injury or medical negligence injury I sincerely hope you feel better and can get back to work soon and just maybe this will give you a little peace of mind, which is priceless. Now get better.
Nothing in this blog is intended to form an attorney client relationship nor to be formal legal advice, always seek the advice of a lawyer that can consult with you on the particular facts of your case.
Disclaimer: Nothing on this page constitutes formal legal advice and you are strongly urged to consult a lawyer about your injury and potential law suit. Manuel Moses, Esq. 236 West 26th Street Suite 303. New York, New York 10001. (212) 736-2624 x11
The Negligence that Caused My Personal Injury Has Left Me with Thousands of Dollars in Unpaid Bills So is filing for Bankruptcy an Option or What? was originally published on Manuel Moses – Personal Injury Attorney NYC