This article is an excerpt from "Living With HIV Disease:  A Legal Guide for Louisiana," (5th edition), which is available in its entirety online at www.aidslaw.org.   What can I do if my financial problems get out of control?

Many people disabled by HIV/AIDS have trouble making ends meet.  Payments from Social Security or even private disability  insurance are often drastically less than you you had been earning.  Your monthly bills, such as rent, utilities and food, continue to come in.  You may now also have to pay your health insurance premiums, something that your employer had done while you were working.  Medical expenses may be piling up. (Even with health insurance, you could be responsible for hundreds or thousands of dollars worth of "deductibles" and "co-payments.")  Credit card and loan payments, which were manageable with your former salary, can be impossible if you are not working or are working only part time.

This situation can become a nightmare:  constant phone calls and letters from bill collectors threatening you with horrible consequences if you do not  pay immediately. 

If you know your rights, however, you can manage this situation.  Some bills can be safely ignored, and some others postponed.  Bill collectors will usually back off, if you explain your situation and are firm with them.

First, find out if any of your debts have disability insurance attached to them.  When you  obtained your credit card, mortgage, or other loan, you may also have purchased an insurance policy designed to make your payments in the event you become disabled.  Check your loan documents to see if you have this coverage.  Also check with your lender - it may have purchased such coverage on its own.  Similarly, your health and life insurance may contain a "disability waiver," meaning you do not have to make premium payments while you are disabled.  Again, check your policy.

How do I decide which bills to pay?

Before deciding which bills to pay and which to ignore, you need to know the consequences.  The four types of debts listed below could have immediate, harmful consequences if you do not pay them.

     Court-ordered payments, such as alimony or child support, must be paid on time or you could find yourself in jail for contempt of court.  If you are unable to pay, do not simply ignore it.  Ask the court to modify the payment order.  A court will usually lower or eliminate your payments to meet your new financial condition.  (Additionally, if you are on SSD, your children should be eligible for "dependents' benefits" which may entirely pay your support obligations.  Check with your local Social Security office.)

     Ongoing services, such as utilities, telephone service, or health insurance coverage, must be paid for you or you will lose future service or coverage.  Similarly, a medical provider can refuse you future treatment is you do not pay your medical bills.  (However, most providers will continue your care as long as your insuance continues to pay most of your bills, even though you are unable to make the co-payments.)

      If you do not pay your rent, you can be evicted.  Although it requires a court proceeding, an eviction can happen very quickly - in as little as 10 days from the date the rent was due.

      Items purchased on credit or pledged as security on a loan can usually be taken from you if you can no longer make the payments.  Under Louisiana law, a lender cannot unilaterally seize your property:  it must obtain a court judgment and an order instructing the sheriff to seize the property.  Despite the need to follow this procedure, seizures can happen quickly and often without prior notice to you.  However, a lender is unlikely to seek the return of any property unless you have missed a few payments and are uncooperative.  If you need extra time, contact the lender in advance.  If you cannot afford to keep an item you should attempt to return it to the lender.

But be aware:  even after a creditor has taken one of the above steps, it may still have the right to recover money from you.  For example, although a bank has repossessed your care, if its resale value is less than what you owe, you may be liable for the difference.

However, whether you have to pay on these or any other debt depends on how old the debt is and on the type and amount of your assets and income.

Under federal and Louisiana law there are certain things that cannot be taken from  you, regardless of how much you owe and regardless of whether you declare bankruptcy.  The most important of these are:

     Social Security payments, annuity income (this should cover private disability insurance payments), pension income, worker's compensation and unemployment compensation (There are some exceptions for child support, alimony, and taxes);

     Up to $15,000 equity in your home;

     The proceeds and avails from a life insurance policy;

     Necessary household appliances and furnishings;

     Necessary personal items and clothing;

     Necessary medical equipment; and

      If you are working, any tools you need for your job, and an automobile if it is necessary for your job (merely going back and forth to work does not qualify).

If all your property and income as exempt, you should notify your creditors.  Once they know you have nothing they can take, they will usually write off the debt or at least stop collection activity.  You can send a letter, like the one below, to do this.   Be sure to send the letter to the creditor's correspondence address; this is usually differnt from the address to which you send payments.  If you do not tell your creditors of your financial status, but simply ignore the bills and phone calls, you will eventually be sued.

(Name and Address of Creditor or Collection Agency)

Re:  (Your Name and Account No.)

Dear (Name Creditor or Collection Agency):

      This letter is to advise you that due to serious medical problems and my inability to continue regular employment, I am unable to continue to make payments on my account.  I have been diagnosed with a life-threatening illness (Mention  AIDS if you feel comfortable) and cannot work sufficient hours to meet my current expenses (State your reduced hours and sources of income).

      I am familiar with Louisiana law and know that I am "judgment proof."  If I file for bankruptcy I will claim all my property as exempt and if you sue me and obtain a judgment, you  will not be able to collect any of my property to satisfy the judgment.

      Please cease all collection activities you have taken or are considering taking.  While I will provide you with reasonable financial and medical information, I must avoid stress.  This includes high pressure collection activities and lawsuits.  If my current situation improves and I am able to resume payments, I will tell you.  In the meantime, I am returning my credit card (or, please cancel my credit card privileges).

      Thank you for your assistance and understanding.

                                                               Very truly ours,

                                                              (Your Name and Address)

Even if you have a small amount of property that is not exempt, it is, as a practical matter, usually safe from your creditors.  Before a creditor can receive any value from your property it must:  (1) sue you and prove in court that you owe it the money; (2) get a court order instructing the sheriff to seize and sell your non-exempt property; and (3) hold the sale.  This can be a fairly expensive procedure.  Unless your property sells for at least as much as the court costs, attorney's fees and sale costs, your creditor will have lost money in its collection efforts.  Thus, if your non-exempt property consists of an old car and an average television and stereo, your creditors are extremely unlikely to try to take them. 

Most bill collectors will leave you alone once you have documented your financial and medical condition.  However, there may be some who will try to intimidate you into paying, even though they know you are judgment proof and even though they have no intention of taking legal action.

One common tactic is for a creditor or bill collector to call you frequently or send many letters.  To stop this, you should send, by certified or registered mail, a letter along the lines of the following:

(Name and Address of Collection Agency or Creditor)

Re:  (Your Name and Account Number)

Dear (Name of the Collection Agency or Creditor):

     I have received numerous phone calls and several letters from  you concerning bills I haven't paid.  As I have informed you, I cannot pay.  Accordingly, under 15 U.S.C. 1692c and Louisiana Revised Statute 9:3562, this is my formal notice to you to cease all further communication with me except for the reasons sepcifically set forth in the law.

                                                      Very  truly yours,

                                                      (Your Name and Address)

The laws mentioned in this letter basically tell creditors to sue you or leave you alone, although a limited number of contacts are allowed in some instances.  If a creditor or bill collector continues to contact you after having received this letter, you may have the basis of a lawsuit against it.  

You may also have the basis for a lawsuit if a creditor or bill collector tells your relatives or others you know of the debt or if it threatens you with actions that it does not intend to take or that are illegal.  If any of these things happens you should speak with a lawyer.

In a simple of "Chapter 7" bankruptcy, you keep your exempt property, all your non-exempt property is divided among your creditors, and most types of debts are erased.  In a wage-earner debt adjustment or "Chapter 13" bankruptcy, you may keep your non-exempt property but part of your monthly income for the next 3 to 5 years is divided among your creditors.  Even if a creditor receives little or nothing, it has no right to collect later on the erased debt. 

Debts not erased in a Chapter 7 bankruptcy are:

      Back alimony and child-support.

      Back taxes.

      Court judgments arising from drunk driving;

      Credit purchases over $500 for luxuries bought within 40 days of filing;

      Debts involving fraud or theft;

      Debts from willful or malicious acts;

      Fines and penalties;

      Loans or advances of $1,000 or more made within 20 days of filing for bankruptcy; and

      Government guaranteed student loans due fewer than 5 years ago.

For most disabled people the only advantage in declaring bankruptcy is psychological:  knowing that creditors are now legally barred from suing or otherwise trying to collect a debt.  As a practical matter, there is little advantage:  as long as your creditors know you are judgment proof, they are very unlikely to continue collection activity even if you don't declare bankruptcy.  Also, declaring bankruptcy may be harmful:  in addition to paying court costs and attorney's fees, you may have to surrender non-exempt property that your creditors would not have gone after on their own.

However, there are 4 situations in which bankruptcy is advisable:

1.     If you have a significant amount of exempt property.  Your exemptions expire when you die.  Thus, you may want to declare bankruptcy to guarantee that your property will go to your friends and family when you are gone and not to your creditors.  (There is usually no need to do this if all you own is household furnishing and personal possessions of average value.  Most creditors simply do not go after property of this sort.)

2.      If you are likely to inherit a significant amount of property.  Inheritances are generally not exempt from seizures by creditors.  Thus you should try to get your debts erased before you inherit.  This, however, requires some foresight:  an inheritance received within 6 months of the date you declare bankruptcy can be taken by the bankruptcy trustee to pay your creditors.

3.      If you are working and your wages have been or are likely to be garnished.  Up to 25% of your net earnings can be garnished by a creditor.  Filing for bankruptcy automatically stops the garnishment.  If you do have income which could be garnished, but all your property is exempt, the threat that you will declare bankruptcy is usually enough to stop a garnishment.

4.      If you are facing foreclosure on your home or car.  If you have fallen behind in your payments, a Chapter 13 bankruptcy may give you time to make up the past due amount.  However, you must be able to make all current payments as they become due.