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Financial distress can affect almost anyone, and bankruptcy protection can be an effective way to recover from seemingly insurmountable difficulties. Many people find themselves filing for bankruptcy as the result of a sudden or unexpected event, like an illness or other misfortune, even if they have never had serious financial difficulties before. Medical bills in particular can be catastrophic to a person’s finances. The stereotype of bankruptcy as the result of irresponsible spending or poor financial management is frequently both unfair and untrue. While the total number of bankruptcies are declining nationwide as the economy slowly improves, the risk of unforeseen problems is always there.

The Los Angeles Times recently reported the story of a woman named Jane Osick who, despite having a long history of good credit, manageable debt, and steady income, found herself needing bankruptcy protection. She worked as a “sensible schoolteacher” in 2005, according to the article, but by 2007, expenses related to her her mother’s illness and death caused her to accrue substantial amounts of debt. This paved the way to her eventual bankruptcy filing.

Around 2005, Osick and her sister refinanced her mother’s house, located in San Diego County, to save it from foreclosure. The mortgage was in their own names, rather than their mother’s name. When their mother died in 2006, they began remodeling the house, intending to sell it. Osick financed the remodel with close to a dozen credit cards, which still had low interest rates in the market of 2006-07. As the Times reports, they finished the remodel at about the same time that the real estate market crashed in 2007-08. Unable to find a buyer, they rented the house, but could not collect rent. The interest rates on the credit cards went up, and Osick had to sell her mother’s house in a short sale. This is a sale at a below-market rate with the primary goal of satisfying the mortgage debt. She filed for Chapter 13 bankruptcy, largely over the more than $120,000 in accumulated credit card debt.

Chapter 13 bankruptcy allows individuals who have a steady source of income to restructure their debts in a way that better fits their ability to pay. A repayment plan under Chapter 13 generally lasts for three years, but may go for as long as five years. A Chapter 13 bankruptcy typically does not result in the discharge of any debts until the debtor’s completion of the repayment plan. In Osick’s case, the court approved a five-year repayment plan obligating her to pay $525 per month to her creditors. She is three years into the plan, and is able both to pay the required amount towards her debts and contribute towards her retirement.

The bankruptcy system can offer relief to people in financial distress by allowing them to restructure their bills and work out new payment plans, to find ways to pay down their debts, and even to discharge their debts completely. Bankruptcy attorney Devin Sawdayi has guided countless clients through the process of personal bankruptcy, offering his knowledge and experience with dignity and respect. To schedule a free and confidential consultation, contact us today online or at (310) 475-9399.

More Blog Posts:

Debtor’s Retirement Annuity is Not Excludable from Disposable Income in Chapter 13, Los Angeles Bankruptcy Lawyer Blawg, June 24, 2013

Payment of a Debt Prior to Bankruptcy is Not a Fraudulent Transfer, According to Ninth Circuit, Los Angeles Bankruptcy Lawyer Blawg, June 20, 2013

How Is Social Security Income Treated in a Chapter 13 Bankruptcy? Los Angeles Bankruptcy Lawyer Blawg, June 9, 2013