Is There a Connection Between Medical Bills and Bankruptcy?
Increasing healthcare costs are becoming a significant burden for America’s families. In fact, medical bills and bankruptcy are closely linked. According to a study by the American Journal of Medicine, just over 62% of bankruptcy cases occur for medical reasons. Though bankruptcy is an important resource for those overwhelmed by medical bills, it’s not right for everyone. Those considering filing should consult an attorney for case-specific advice.
Will Bankruptcy Eliminate Medical Bills?
It’s possible to discharge most medical bills in bankruptcy. Here, a borrower is released from personal liability for the debt and creditors cannot pursue further collection attempts. However, not all debts may be discharged. If a debtor is considering filing for bankruptcy, an attorney will tell them which debts may be discharged.
Medical Bills and Unsecured Debt
Medical bills are typically considered unsecured debts because they’re not backed by collateral. While credit cards, student loans, and medical bills are unsecured, car loans and mortgages are secured. The distinction between secured and unsecured debts is crucial in determining whether one should file bankruptcy for medical reasons.
Chapter 7 for Medical Bills
Oftentimes, a Chapter 7 bankruptcy will completely wipe out a filer’s medical bills. Commonly referred to as liquidation bankruptcy, Chapter 7 requires debtors to sell some assets. However, not all assets are subject to liquidation, and state law offers numerous exemptions. For additional information on exemptions, consult a local bankruptcy attorney.
Chapter 13 Bankruptcy
Chapter 13 is radically different from Chapter 7. While Chapter 7 involves liquidation, Chapter 13 requires the formation of a payment plan. These plans may include medical bills, and the amount to be repaid will depend on a case’s specific facts.
Consult a Bankruptcy Attorney Today
Attorneys understand that filing for bankruptcy due to medical debt is an intimidating and confusing process. That’s why they work so hard to simplify the process for clients. A lawyer will protect a client’s rights, inform them at every step, and help them maximize the protections offered by bankruptcy. Whether a client needs help with Chapter 7 or Chapter 13, the firm’s attorneys will offer competent, trustworthy legal advice. Fill out the online contact form or call today to schedule a free consultation.