Going Bankrupt Should Be Only Your Last Resort

HIV Disease Can Cause Difficult Money Problems

In this article, we explain what you can do if you are unable to pay your debts. If you have questions about financial problems or other legal issues, call AIDS Project Los Angeles' (APLA) Legal Services Department at (213) 993-1503.

Q. Is bankruptcy right for me?

A. A person should only file for bankruptcy when there are no alternatives. Bankruptcy is a court procedure that wipes out certain debts. You can wipe out unsecured debts like credit card debts, utility bills, back rent or medical bills. You cannot wipe out debts like criminal fines, bad checks or child and spousal support. Also, you cannot wipe out secured debts such as home mortgages or car payments. Bankruptcy is not for everyone with a lot of debt. People who are "judgment proof" do not need to file for bankruptcy. "Judgment proof" means that you do not have any assets which the people you owe can take to pay your debts. You are probably judgment proof if:

  • You do not own any property except basic needs.
  • You do not own a house or an apartment.
  • Your only income is from government benefits or disability insurance.
  • You have no significant savings.

A person who files for bankruptcy will still be responsible for any future debts, such as rent, utility bills and medical bills. If you incur a debt after the bankruptcy you are stuck with it for seven years (filing for bankruptcy is permitted only once every seven years). So if you do not have health insurance or car insurance, you should not declare bankruptcy unless absolutely necessary.You should only file for bankruptcy to protect an asset such as your salary, house or bank account. If you have specific questions about bankruptcy, call APLA's Legal Services Department at (213) 993-1503.

Q. How do I get the people I owe to stop calling me?

A. One of your options is to write a letter to your creditor demanding that they cease all telephone contacts. Sometimes it's easiest just to get a new unlisted phone number.

Abusive phone calls from collectors are illegal. Collectors also cannot call you in the middle of the night or at other odd hours; or threaten you with going to jail. If a creditor or collection agency is harassing you, do not hesitate to call APLA's Legal Services Department at (213) 993-1503.

Q. I cannot pay my bills. Should I just ignore them?

A. It depends. Creditors can sue you if you do not pay your bills. If they win in court they can put a lien on your house, attach your bank account and garnish your wages.

Q. Can I be arrested for not paying my debts?

A. You cannot be put in jail for not paying your debts unless the debts are for unpaid child support and bad checks.

Q. Can I get my student loans forgiven if I am disabled from HIV?

A. Yes, if you are totally and permanently disabled. Call the agency servicing the loan and ask for a physician's certificate of Borrower's Total and Permanent Disability. But if you do have your loans discharged, you will not be able to get new student loans.

Q. What about taxes?

A. Both federal and state tax agencies are usually understanding if a person cannot pay taxes because they are disabled. These agencies will also work with you if you are still employed and willing to make a reasonable payment plan.You should never ignore a letter from the Internal Revenue Service or the Franchise Tax Board.

For information about legal issues call: AIDS Project Los Angeles' (APLA) Legal Services Department at (213) 993-1503.

This article has been reprinted at The Body with the permission of AIDS Project Los Angeles (APLA).