Your Medical Debt and Bankruptcy


Your Medical Debt and BankruptcyWith the rising cost of healthcare and the diminishing amount of coverage offered by health insurance policies, it is not surprising that one of the leading sources of debt for Americans today are medical expenses.  Depending on their health coverage, a person who has been seriously injured or suffered a catastrophic illness may be expected to pay tens of thousands of dollars from their own pocket.  Further, even those with less severe injuries and conditions may be facing insurmountable medical bills which places them and their family in the position of struggling to pay their other household expenses.   Fortunately, under most circumstances, bankruptcy can offer relief from medical debt.

In most cases, medical debt is treated as general unsecured debt and is therefore eligible to be discharged in bankruptcy.  The first step in determining how the bankruptcy process may address your medical debt is to determine which type of bankruptcy relief you qualify for and is best for your circumstances.  Chapter 7 bankruptcy offers an option which would allow you to discharge most or all of your qualifying medical debt.  Chapter 13 bankruptcy allows the debtor to repay their debt according to an agreed schedule and in many, cases allow for the discharge of some medical debt.

Chapter 7 bankruptcy requires that the debtor liquidate all of their assets which are not considered exempt from the bankruptcy and then use the proceeds to pay their creditors.  Once the debtor has used these funds towards their debts, the remainder of their debt will be discharged by the court.  There is no limit on the amount of medical debt you can discharge under Chapter 7.  For those with significant medical debt, Chapter 7 offers them the opportunity to have a new beginning free from their past medical debt.  This type of relief is a good option for many people, but they must meet certain requirements in order to qualify to file for Chapter 7.  Not all debtor will qualify for Chapter 7 relief, but there is another option which may be available through Chapter 13.

Chapter 13 bankruptcies involve the debtor entering into a payment plan in which they agree to pay their creditors over a period of years.  Your medical debt will be added to any other qualifying debt into one total amount.  Under the plan, each creditor will be paid a certain percentage of what you owe.  The timespan of the payment plan could be up to five years, and the plan will have specific requirements.  After the debtor has paid on their debts for the required time period and according to the terms of the plan, the remaining debts they may have will be discharged by the bankruptcy court.

Considering bankruptcy is an important decision which should be considered in view of your situation.  For those with significant medical debt, bankruptcy may offer much-needed relief from an overwhelming burden.  We have the knowledge and experience you need to help you understand your choices and determine the option which best works for you. Please contact us online or by phone if we may be of assistance.

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