Far too many Americans find themselves in a financial crisis because of soaring medical costs.
All it takes is one trip to the E.R. or a bad diagnosis for things to spiral out of control.
But there are options. Will your medical debt be eliminated if you declare bankruptcy?
Learn more about it and what it means when it comes to medical debt.
Sadly, nearly 1.7 million American households have had bankruptcy due to mounting medical expenses.
This type of debt creates major stress and has become a fairly common reason to file.
So, can you declare bankruptcy solely for your medical bills? The answer is no.
All of your debts will be included in a bankruptcy in order to be fair to creditors.
The good news is that your medical debt will be part of your discharged debts if you decide to declare bankruptcy.
Medical debt is considered an unsecured debt when you file bankruptcy.
This means it’s treated similarly to your credit card and other unsecured debts and will be discharged once your bankruptcy is finalized.
Since it is unsecured, you don’t stand to lose your home or any other assets when you file bankruptcy.
Filing Chapter 7 bankruptcy is often a good option for people who are overwhelmed with expenses due to medical bills.
It also makes the most sense if you’re current with secured loans such as your mortgage.
In Chapter 7, your medical debt will be discharged and wiped out along with your other unsecured debts.
But you must qualify in order to file Chapter 7. The Means Test will help you determine if you’re eligible.
If it shows that your income is too high you will need to consider Chapter 13.
Filing Chapter 13 can also provide you with medical debt relief when Chapter 7 is not an option.
When you declare bankruptcy with Chapter 13, you’ll essentially be reorganizing all of your unsecured debts—including medical bills.
A repayment plan will be formulated based on your income and your existing debts.
The amount you pay may be a lower negotiated amount.
Your medical debts and other unsecured debts will be discharged and wiped clean once your bankruptcy plan is complete.
Medical debt is typically not a choice and dealing with it is emotionally draining.
If you’re one of the millions of Americans struggling to pay bills due to unexpected medical debt, help is available.
The experienced bankruptcy lawyers at Parker & DuFresne can guide you through your options.
We’ll work with you to determine if filing Chapter 7 or Chapter 13 is the right choice for your personal circumstances. Contact us today to schedule a consultation.
Parker and DuFresne