Sunday, December 12th, 2010
The Wall Street Journal recently published a new story entitled Hidden Medical Debt Trips Up Homeowners. The report documented several cases in which small medical bills that had been turned over to collection resulted in a more than 50 point drop in a homeowner's credit score.
In one situation, a homeowner attempted to refinance his mortgage, only to discover that two unpaid medical bills totaling less than $50 had caused his credit score to drop. As a result of the lowered credit score the refinancing bank demanded over $4,000 in closing costs.
In another situation, less than $500 of medical debt reported to a collection agency disqualified a homeowner from a favorable interest rate, which would have resulted in tens of thousands of extra interest charges.
In many of these situations, the consumer never knew about the unpaid medical debt – the provider simply turned the claim over to a collection agency which immediately reported it to the credit reporting agencies as delinquent debt.
According to the Journal, "otherwise well-qualified borrowers with good loan-to-value ratios and steady employment are increasingly finding it difficult to refinance because of medical billing mistakes marring their credit."
If you or a loved one has been in the hospital, you probably know that a single visit can result in five, ten or even more bills from separate vendors – the hospital, the hospital pharmacist, the anesthesiologist, the ambulance service, etc. I do not find it surprising at all that a patient would not know about one or more bills.
I think that an important point here has to do with the cascading effect of negative credit. Even a small late payment on an account can result in a dramatic lowering of your credit score. Other creditors will receive electronic notice about your lowered credit score and when permitted, they will increase your interest rate, lower your credit limit and increase penalties and fees.
Lenders Often Cause Delinquencies by Changing Terms Unexpectedly
On more than one occasion I have met with a potential bankruptcy client who was forced into Chapter 7 or Chapter 13 because of changed terms, not because of any delinquency. These changed terms can arise from a tiny delinquency – like the unknown, unpaid medical bill issue discussed in the WSJ story, or for other reasons. Recently I met with a small business owner who was completely current on his personally guaranteed revolving line of business credit. His bank was taken over by another bank which conducted an audit and, without warning, the business loan was "called in."
One minute, my client was operating a viable, functioning small business that was current on its obligations – and literally within a matter of days, that business was shut down by a bank for no apparent reason.
The point here: examine your credit reports regularly and challenge even tiny delinquency reports as the damage to your credit will arise from the existence of the delinquency as opposed to the amount of the late payment. Even small downgrades to your credit score can result in a negative debt snowball.
Posted in Consumer Protection, Credit, Credit Reports, Credit Scores, Credit reporting errors, Discover, FDCPA Claims, General consumer bankruptcy info, a, arise, bank, billing, bills, cases, claim, debt, delinquency, demanded, entitled, hidden, knew, lowered, marring, medical, medical debt and bankruptcy, medical debt and credit reporting problems, mistakes, provider, refinancing, reports, score, simply, small, story, the, tiny, totaling, trips, turned, unpaid | Comments Off
Sunday, June 6th, 2010
Because the bankruptcy system operates efficiently and quickly and it serves hundreds of people every day, I sense that many bankruptcy debtors forget that everything they submit to the bankruptcy court is done so under penalty of perjury. I recently ran across an article from a Texas newspaper about a Chapter 7 debtor who ended up in federal prison, convicted of bankruptcy fraud, because he failed to disclose an $84,000 insurance payment, proceeds from the sale of a vehicle and several bank accounts. This particular debtor used Chapter 7 to discharge over $1 million in liabilities.
I bring this case to your attention for several reasons. First, you should recognize that Chapter 7 trustees are very conscious of the likelihood that a certain percentage of debtors will fail to disclose assets. While it may seem that your Chapter 7 trustee is not paying much attention to any particular case, I suspect that trustee training programs provide trustees with profiles of the types of debtors likely to omit important information as well as resources to search for evidence of hidden assets.
In the Texas debtor's case I wonder how he thought that a vehicle sale would be missed by the trustee, given that vehicle liens are public record, as are vehicle registrations.
These days almost any sale of real estate or motor vehicles will generate a paper trail of tax forms, insurance records and title documents. Further I have personally seen situations where an unhappy ex-wife or a former friend will draft a "poison pen" letter to the trustee will allegations about improper activities by a bankruptcy debtor.
Second, be aware that Chapter 7 trustees and the U.S. trustee like to pursue fraud cases periodically to send a message to debtors and debtors' lawyers that the trustees are paying attention. Bankruptcy lawyers may be tempted to say "don't worry about it," to avoid extra expense and complication but playing fast and loose with disclosure rules can create major problems for both debtors and their lawyers.
Occasionally I meet with a client who may say something like "between you and me, no one knows this but…." This type of statement is the last thing that any bankruptcy lawyer wants to hear. From my perspective that client is really saying "I am thinking about committing a federal crime and I want you to help me." My license to practice law is not worth the fee for any one case and I have and will continue to decline representation for any client who wants to use my office to file inaccurate schedules.
Nobody likes to surrender assets, especially in a bankruptcy case that may have come about because of factors beyond one's control (such as a layoff, unfair treatment by a lender, a lawsuit judgment that you did not know about). In most bankruptcy cases you will not lose in assets. However, losing a few hundred or thousands of dollars is a far better fate than federal prison.
Posted in 84, Chapter 13 issues, Chapter 7 issues, Debtor, Discharge issues, Fraud, Fraudulent Transfers, General consumer bankruptcy info, Insurance, Trustee, a, an, and, assets in, assets nbsp, bankruptcy crime, bankruptcy fraud, cases, committing, crime, disclose, documents nbsp, ended, evidence, failed, failure to disclose assets in bankruptcy, federal, hidden, periodically, prison, programs, provide, pursue, records, texas, the, title, training, trustees | Comments Off
