Dealing with Creditors

Unfortunately credit issues often arise when you are going through cancer treatment. The financial impact varies, but often there are significant medical debts, costly medications, a reduction or loss of income, accumulation of credit card debt, and/or late or unpaid rent, mortgage, or vehicle payments. Patients may be forced to obtain expensive sub-prime lending such as payday loans, title loans, short term, high interest rate line of credit loans, or high rate home equity loans.

These financial issues can create stress, which can negatively impact your road to recovery. There are methods to address these issues and organizations, such as LINC, available to assist you in managing your financial situation.

Getting Started

We recommend that you contact the local office of the Virginia Department of Social Services to determine what income subsidy and support benefits may be available. An eligibility worker will review your circumstances to determine what services the Commonwealth of Virginia may be able to provide. You may also have access to a social worker through your hospital that can help you with medically related issues. Utilize the social worker, and ascertain what type of assistance you may be eligible to receive.

The most important step in addressing financial issues is COMMUNICATION. It is important for you to contact your creditors before any legal actions have been started. Explain to them your situation and attempt to set up arrangements for minimum payments to be made.

It is also important to understand where your money is going on a monthly basis. We recommend that you create a monthly budget, so that you have a strong understanding as to what your income and expenses are on a monthly basis. List all of your monthly income, and then list all of your monthly expenses. This can help you prioritize your expenses, and identify any shortfalls that you may have.  LINC can refer you to a financial counselor who can help.

How do I deal with my medical creditors?

There are several methods available to deal with medical creditors. As always, it is recommended that these matters are addressed before your creditors taking legal action against you. Communicate with your insurance company to determine what services are covered with your insurance plan. Ask your insurance provider for advice on what you need to do to comply with their requirements.

The following are options that you may want to pursue:

Ask your doctor for assistance. Some hospitals and pharmaceutical companies provide free or low cost care and medicines, but these are available only through your doctor.

Ask your hospital’s social worker or LINC about community and government resources that may be able to help you with co-pays, medical equipment, and transportation.

Speak with the hospital’s billing department. If you are not having success, request to speak with the supervisor. You need to speak with someone who has the authority to set up feasible payment arrangements. Be prepared when you call. Have your budget and other supporting documents such as your last pay stub and most recent bank statement and tax return available. Explain to them that you would like to work with them, but you only have a certain amount of money available. If you have a short term reduction in income, explain to them that you will be able to increase payments in the future.

Contact a credit counseling organization to assist you in setting up some terms to make payments on the debt. These companies can analyze your financial situation and discuss with the creditors if repayment is viable, and under what terms. Be careful when selecting a credit counseling organization, as many companies have jumped into this business to take advantage of people that are in a desperate situation. Some reputable credit counseling organizations can be found at www.cancerlinc.org.

Bankruptcy may be an option for you to gain relief from your creditors. It should be done only with legal advise and when no other option is viable. Contact an attorney who specializes in bankruptcy or call LINC at (804) 644-5462 for a referral.

How do I deal with my Credit Card debt?

Credit card debt is dealt with similarly to medical debts, as both are unsecured debts. However, the credit card companies are more likely to participate in plans that the credit counseling organizations use to assist people pay back their debts.

The following are options you may want to pursue:

Communicate with the creditor directly to set up payment arrangements. Be sure to get an agreement in writing and then comply exactly as stated in the agreement. Be sure to pay by a method that allows for you to provide proof that the payments were made according to your agreement (i.e. Western Union Payments or send the payments by Certified Mail).

Analyze your current credit card accounts and determine their interest rate. If possible, roll over you current balances to cards with lower rates.

Always make the minimum payment to avoid costly late fees.

Credit counseling organizations offer programs called debt management plans. These plans allow for you to reduce the amount of interest that you pay on your credit card debt. These plans generally are successful for people who have good income, but would like to pay the debt off in a quicker time frame then if they continued to maintain minimum payments.

Credit counseling organizations offer debt settlement plans. The credit counseling organization will negotiate with the creditors to reach a lump-sum settlement with them, then collect funds from you to settle the debt. These plans are risky because during the negotiations, no payments will be made on the debt until the lump-sum payment is made. Therefore, you will continue to be delinquent on your credit cards and amass late payment fines, while the creditors can report negatively to the credit reporting agencies, and ultimately take legal action against you.

Bankruptcy may be a way for you to gain relief from your creditors, if no other option is viable. Many times you can file for bankruptcy and keep your home.

Use the equity in your home or other assets to pay your debts. This will allow you to consolidate the debt under one loan that will be paid back over a longer period of time. This can reduce your regular monthly expense on the debt. This is a risky alternative and should only be used after much study. Although it provides easier access to cash, there are consequences as it changes the nature of the debt from unsecured to secure by your real estate. Therefore, if you fail to make regular payments, your home could be foreclosed. Borrowing against your home should be your last resort – exhaust all other options before taking this route.

How do I deal with my mortgage company if I have missed payments or if I have a foreclosure scheduled?

If you have missed mortgage payments, it is best to address this issue immediately. The quicker you act, the more options that will be available and the cheaper and easier it will be to resolve.

There are several options that may be available to avoid default:

Reinstatement: The mortgage company is paid the total amount that you have fallen behind on your mortgage.

Repayment Plan: The mortgage company agrees to allow you to maintain your regular mortgage payment, plus an additional amount for a set number of months to cure the arrears. These are generally one year or less in duration.

Forbearance: The mortgage company agrees to accept lower or no monthly payments for a specific time frame. Typically at the end of the forbearance period, you must bring the account current.

Modification: The mortgage company agrees to change the terms of your initial agreement. These changes may include extending the term of the payback period or providing for the arrears to be added to the principal unpaid balance.

Short Sale: The mortgage company and any other lien holder must agree to accept less than the total amount owed on the loan and foreclosure is avoided.

Refinance: Obtain a new loan to payoff existing liens against the property. Be careful of predatory lenders who will charge high fees and interest rates. If you are currently behind on your mortgage, it is unlikely that a reputable mortgage company will refinance the property.

Deed in Lieu of Foreclosure: Give the property back to the mortgage company.

Private Mortgage Insurance (PMI): PMI will need to pay a claim to the mortgage company if the property were to foreclose. Therefore, your PMI company may assist you in bringing the mortgage current by providing a loan.

Chapter 13 Bankruptcy: Bankruptcy can be an effective way of protecting your real estate and providing for the late mortgage payments.

How do I deal with my automobile financing company if I am behind on my payments or they are threatening repossession?

Vehicles are obviously very important to provide you with transportation to and from work and medical treatments. If payments are missed the automobile financing company can repossess your vehicle and sell the vehicle at auction. After the vehicle is sold, you would be held liable for any unpaid portion of the balance owed on the vehicle (deficiency balance).

There are several options that may be available to avoid the repossession of your car:

Forbearance: The automobile financing company may agree to accept regular payments, plus an additional amount to cure the amount that you are behind on your loan.

Refinance: Obtain a loan to payoff your current auto loan. These can be difficult to obtain if you currently are behind on your loan for your vehicle. Avoid high fees and interest rates.

Sale: Prior to repossession you can sell your vehicle. You must pay off the loan in full, in order to pass title to the purchaser.

Deferment: Request that payments be moved to the end of your loan.

Bankruptcy: Chapter 13 bankruptcy can be an effective way to protect your vehicle, and provide for the vehicle to be paid through bankruptcy.

What if I fall behind on my rent payments?

Maintaining shelter is critical to creating an environment to allow for your cancer treatments to be successful. Rent payments are a priority. If at all possible, be sure to maintain these payments. Rental companies can move quickly to evict a tenant.

There are several suggestions to avoid eviction:

Talk to your landlord. Explain your situation and discuss setting up payment arrangements. You may also offer to make an additional payment to cure the arrears.

Contact local non-profit organizations that can provide rental assistance. Several organizations are lists at www.cancerlinc.org.

Be pro-active.  Work with your creditors.

Financial issues can create significant stress and that stress can cause you to take desperate measures without fully understanding the consequences. Unfortunately, this can lead to additional financial stress and issues.

Avoid predatory lenders

There are lenders who charge very high interest rates, particularly if you should fall behind on a payment. Avoid payday loan and title loan companies, if at all possible. These companies will make it appear easy to obtain funds to deal with a crisis, but these loans are very expensive and charge very high fees and interest rates.

These loans can create a dangerous cycle from which you may not recover.  There are also companies that will prey on folks who own real estate and are in financial distress. These companies will offer to refinance your mortgage or provide an additional mortgage against your property to ‘help’ you deal with your financial crisis. However, these companies charge very high fees and interest rates. Then if you fail to make payments as agreed, they can foreclose on your property. Make sure you understand all the fees, penalties, and interest that you will be responsible to pay to complete your loan. Ensure you have the ability to maintain your regular monthly payment.

Other financial issues

The Virginia State Bar’s Senior Citizen’s Handbook provides useful information on landlord tenant issues, rental assistance programs, and other financial resources that may be available in the community. Although some of these services serve only seniors, good referral sources to other programs can be found on the Virginia State Bar website.