Quick history: My first child was born at 20, two more in the subsequent 10 years. Both my husband and I have worked very hard at lower-wage jobs to try to keep our family afloat, but essentially we've always been broke. Our daughter was diagnosed with cerebral palsy in 2005, we were insured, but just to get the diagnosis, we racked up close to $20,000 in medical bills, which is still climbing for her treatment. Now our youngest son has a severe medical condition and we reached our insurance out-of-pocket maximum of $12,000 between January and May this year. We will continue to have enormous medical bills going forward. We also made a very bad move and purchased a new Kia (which we couldn't afford), instead of paying our loan payments in 2007. We allowed it to get repossessed. The company that holds the debt periodically gets permission to garnish our wages until we're able to prove we don't have the means to pay. My husband has worked himself through the ranks over the past 8 years, finally earning enough seniority at a major railroad to make a very good salary. He was taking home $1,500-$1,900 a month and living in another state ($500 rent for his apartment.) As of this month, he's been and should continue to be able to hold a job as an engineer grossing about $6,000- $8,000 per month. I net approximately $200 a month working part-time.
My question: My husband's family feels we should file for bankruptcy to give us a fresh start. We owe approximately $42,000 between the car and medical bills and an old overdrawn bank account. I think that since we finally, after 15 years, have the means to pay our creditors back, we should. I want a house one day. I'm torn. I worry it will take us years to pay back our creditors and we'll continue to be broke. Our oldest son starts college in four years, and we'd like to have the means to financially assist him. Do you think we should file for bankruptcy?
Carmen Wong Ulrich Aug 8, 2013 Former Host
Medical debt is a tough one. Especially when the debt is tied to children. It's tough because like you, I'd want it to go away. However, you're not so far down the hole that filing for bankruptcy would be the answer or even work. As you mention, your husband is now making substantial wages. You can file for bankruptcy but that doesn't mean you get it. You end up in bankruptcy court where your assets and ability to earn enough to pay these bills will be assessed, and you may be rejected because of your husband's income.
Here's what I'd rather you do now. Head to a non-profit credit counselor near you through the National Foundation for Credit Counseling. A non-profit counselor charges a small administrative fee to review all your debts: Who you owe, how much, at what rates and your options. You may be able to settle some of this medical debt, which means paying in a lump sum less than you owe. Also, the counselor can work with you to try to consolidate some of these debts to lock in a much lower interest rate and/or talk down some of your interest rates. You'll also get help with strategy on making payments. The NFCC will also give you a realistic idea of if you're a candidate for bankruptcy. Probably not, but they'll have more and better information for you.
Be disciplined about paying these debts and not upgrading your life to match your husband's new paychecks. It's a temptation, but if you can keep on living as if you made much less, paying these debts--and even helping your kids with college--can be within your reach. Best of luck and wishing you and your family the best of health as well.