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Hernando County Law Blog

Is medical debt still the main cause of personal banruptcy?

Medical debt is hardly an isolated issue in America. After all, millions who required various procedures and treatment now experience a different, financial type of suffering. The debt caused by medical bills affects countless Floridians, but will this trend ever come to a close? Some experts claim that this issue is hardly at its end, while others see the light at the end of the tunnel.

A USA Today article from last May appears to give this issue a sobering account, calling medical debt the number one reason Americans file for bankruptcy. Providing data from the Kaiser Family Foundation, Today shares that over a quarter of adults in the country have trouble paying their medical bills. And while having insurance is usually a positive sign, this type of debt is unfazed by such protection. An unsettling amount of earnings go directly toward covering medical costs, and the most disturbing aspect is that these efforts still do not make ends meet. The two options from which most Americans choose are emergency savings or filing personal bankruptcy.

Estate planning is not a one-time event

As the first month of the new calendar year has now passed, many people are turning their attention to the upcoming tax season. However, Florida residents could also take the chance at this time of year to review their larger financial picture. Instead of focusing only on last year's taxes, now is a great time for you to look ahead and how you might develop or change your estate plan to put you and your heirs in a better financial situation.

As Fidelity Investment explains, there are many things that may make reviewing and making changes to your will or trust beneficial for you. Changes in tax code laws may be one of those. Other things could include life changes such as a new marriage for you or any of your heirs. Similarly if you or one of your adult children for example has recently gotten divorced, you will likely want to change your estate plans so that the now former spouse is no longer set to receive a chunk of your estate.

What to put in your will when you have minor children

Most people do not think about writing their wills until they are older and facing their mortality. However, as we have addressed in previous posts, adults can never be too young to start thinking about their estate planning.

There are many reasons to update your will, such as getting married, having children, obtaining significant assets or getting divorced. One of the most important things for Florida residents to consider during their estate planning is how to provide for minor children after an unforeseen death.

    People need to alter their wills after a divorce

    A divorce equals a lot of changes coming into your life. You and your spouse should have created wills after marriage, and upon a divorce, the two of you also need to make sure your wills receive updates. The state of Florida does help a bit with this. In 2012, the state passed legislation automatically revoking beneficiary designations in people's wills in the event of a divorce. 

    It is highly recommended to meet with a lawyer once the divorce is final to ensure your will adequately reflects your wishes. For example, your former spouse may no longer be a beneficiary, but you need to decide who will not inherit your assets upon your passing. 

    The complex issue of medical debt

    Medical debt has moved to the forefront of national concern in recent years. Although it appears to be on the slight decline, it sends countless Americans into financial crises year after year. Personal bankruptcy has been the answer for many Floridians, but what seem to be the causes of medical debt overall? 

    Most would wish to do away with heated creditor calls and the worry that monthly bills may go unpaid. That is why, as The Atlantic noted in a 2014 article, so many Americans are turning to personal bankruptcy to address outstanding medical debt. At the time of the article's publishing, the most common cause of personal bankruptcy was medical bankruptcy, as healthcare debt often makes credit card and bank debt pale in comparison. However, The Atlantic points out that some hospitals make errors when issuing bills, while others charge different amounts for the same procedures. These scares made the Affordable Care Act and Medicaid expansion seem all the more like heroes during stressful times.

    The struggle of student loan debt

    Nearly every college student in America has likely heard of looming student loan trouble. Like a fairy tale that warns children of the deep, dark forest of dangers, the mountain of debt that countless students have ahead of them can seem a projected adulthood nightmare. The reality of education in today's society, unfortunately, can come with a steep price tag -- one that some graduates carry on their shoulders for decades, and one that dissuades others from seeking a college degree altogether. For Florida students, is there an answer to this debacle?

    As with many types of debt, some students and graduates have turned to personal bankruptcy for solutions. Last April, Vice News considered the process of filing personal bankruptcy on student loans, and why some find it difficult to do so. Millions implore loan servicers to readjust payment plans, only to discover the exact same obstacle the following month. Shockingly enough, some experts point the finger at loan giants such as Sallie Mae for carrying out dishonest practices, claiming these companies loaned money to those they knew would have trouble repaying. Sallie Mae admitted involvement, while other companies have denied such allegations. Vice quotes some experts who argue that one route to solving the issue is to revive bankruptcy protection to student loans -- a procedure that has not been active since 1976.

    What is the Chapter 7 means test?

    Like many in Hernando County, you may want to try and avoid having to file for bankruptcy at all costs. Yet in certain situations, seeking such protection might give you the best chance to rebound from whatever financial hardships have placed you in this precarious position. The question then becomes which bankruptcy case is best for you: Chapter 7 or Chapter 13? 

    A Chapter 7 bankruptcy allows certain debts to be discharged, while a Chapter 13 case requires you to still repay them through a repayment plan. That fact may have you thinking that you would a prefer to file under Chapter 7. However, your eligibility to do so must first be determined through the Chapter 7 means test. 

    The power of the QDRO

    Getting a divorce may not be what most people in Florida want to do at the start of a new year but for some, it may provide the fresh start for a better future that they need. If this happens, it will be important for spouses to be educated about the financial aspects of their divorce. The choices made during a settlement agreement may have implications that the average person is unaware of but that could have significant consequences that should be provided for up front.

    One issue that the U.S. Department of Labor describes is the risk of paying high taxes and early withdrawal penalty fees on money taken from a 401K account and paid to a former spouse as part of a property division settlement. This might happen if a qualified domestic relations order is not used and can further cut down the amount of retirement money that the account-holding spouse is left with.

    Update your will after moving to Florida

    If you already have a will written and approved by an attorney, then you are already far ahead of most American adults. However, a will should never remain a stagnant document. If you create your will early on in life in your 20s or 30s, then you will need to update it constantly throughout the years. One time when you definitely want to alter it occurs when you move to another state

    Most people know to update their wills after marrying, divorcing or having kids. However, an interstate move can also impact the division of assets set forth in a last will and testament. The last thing you want to happen is your will becoming misinterpreted upon your death, leaving behind stress and heartache for those left behind. 

    Dividing debt after a divorce

    Finances can be one of the biggest contributors to marital strife. Yet it is important that couples in Hernando County understand that their divorces do not signal the end of having to deal with the financial decisions they may have made during their marriages. Many may view divorce as a way to separate themselves from any debts they or their spouses have incurred. In reality, however, the standard has been set that if divorcing couples should share their marital assets equally, so too should they share their debts. 

    Indeed, Section 61.075(1) of the Florida Code of Civil Practice and Procedure states that family court officials go into divorce proceedings assuming that the distribution of marital assets and liabilities to be equal. That is not to say, however, that marital factors will not also be considered when determining who gets what. These include: 

    • How long a marriage lasted
    • The role of each spouse in contributing to the household income (as well as the care of the home)
    • The current economic circumstances of each spouse 
    • To what extent each spouse sacrificed to contribute to the career success of the other
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