We have a lot of debt and serious medical issues that are generating medical bills we won’t be able to pay.
We bought a new house 2 years ago and haven’t been able to sell the old house. It is rented for just enough to cover the first mortgage payment. We have a maxed out equity line on that house as well.
The new house is in a neighborhood in which the values have fallen some and there are many houses on the market that aren’t moving (NC).
We have $25,000 in student loans, $15,100 car loan, $58,000 in unsecured debt and a loan on the 401k of $7700.
We are paying everything on time but have no savings. My husband has very recently been diagnosed with an aggressive, advanced cancer and has just begun treatments.
We have health insurance but it is a high deductible plan with an HSA that we just started about a year ago so this first round of bills will wipe it out. The hospital that is doing the treatment is out of network so we will have to pay 50% after we meet the annual $12000 out of pocket maximum.
We have considered walking away from the mortgage and keeping other things current or just filing bankruptcy and trying to start over. Right now we make about $98000 annually but the loan on the 401k eats up $600 per month and we can not get them to let us discontinue the payroll deduction as some of the money is company contribution and they tell us that we can’t have access to that prior to age 55 except through the loan. We really don’t know what to do and the stress is awful.
Especially in light of dealing with my husband’s serious diagnosis.
Given our situation, what is our best course of action. Is there any legal way we can stop the payroll deductions so that we don’t have to file bankruptcy or lose the house?
First off, my prayers and hopes go out to you and your husband to beat his cancer.
I am so sorry that you have to deal with the financial pain at a time of emotional and physical pain. Unfortunately, it is a situation faced by many.
Now my suggested course of action is from a holistic point of view and individually the parts might not seem sensical but as a whole I think they make sense.
You’ve said that your husband has advanced and aggressive cancer. Not that I know anything more about his medical condition, but for the sake of this discussion, while I hope that he has a full recovery, sadly I’m going to assume the worst.
If your husband were to pass away his payroll deduction for the loan would cease and the plan would be paid out.
Additionally, if he were to pass away, I suspect that you will have some amount of life insurance coming to you, either from an individual policy you may have or an employer sponsored group insurance policy.
Probably one of the most important areas to keep stable at this time, is the house in which you both currently live. I would image that not having to deal with moving right now, would be a blessing for the both of you.
My primary goal at this point is to set you up with a plan that will minimize the stress to help you to deal with the cancer, and to prepare you in the event that he were to pass away.
I think the most logical approach in that case is for you to seek legal protection under chapter 13 bankruptcy. Why a chapter 13? This should allow you to regroup your finances to what you can afford in the situation. It will also protect you from any collection activity at a time when you least need that stress.
But I think it is imperative that you immediately find a local bankruptcy attorney and discuss this situation openly and honestly from the point of view of the life you need to live under the circumstances you have. The attorney will see that with the massive out of network bills still coming that more debts will be piling up from that so a chapter 7 bankruptcy probably does not make sense right now. A good plan of action and coordination with your bankruptcy attorney is going to be just as important as good medical right now.
Using this approach you will also be able to stay in your house and keep your car so you can get back and forth for medical treatments.
You may want to think about handing the rental house back to the bank and including any debt from that in your bankruptcy.
His student loans will not extend past his death if they are government backed loans. In the meantime if he is totally or partially disabled you could apply for a discharge under that program. Here is the form.
In bankruptcy, any life insurance proceeds should not be attached by your creditors. If it does appear that your husband will regrettably pass away, then talk to the bankruptcy attorney about converting your chapter 13 bankruptcy to a chapter 7 bankruptcy at that time and include the remaining medical bills that can’t be paid.
I can only steer you based on what you’ve shared with me. I strongly suggest that you print out this question and answer, contact a local bankruptcy attorney, schedule a free appointment to go in and talk, and discuss this approach and your situation with the attorney.
I just want for you to understand, that bankruptcy in this situation is not a failure route. It is a route that will allow you to minimize your stress, get the most consumer protection, allow you to make your time left with your husband the best it can be emotionally and without the stress of this financial situation, and prepare you for debts to come.