Medical debt is one of the most common reasons people turn to bankruptcy for relief. The high cost of health care is often the trigger for bankruptcy filings, with two-thirds of people citing medical issues as the major contributor to their financial downfall.
If you have excessive debt from past-due medical bills, filing for bankruptcy is one way that you might be able to eliminate this financial burden. Since medical bills usually fall under the category of unsecured debt, they can be discharged through Chapter 7 or Chapter 13 bankruptcy.
If you file for Chapter 13 or Chapter 7 bankruptcy, the federal court will issue an order called an automatic stay. This order informs all your creditors that they must cease collection actions.
If you don’t have the means to settle your debt and creditors are threatening to take legal action against you to collect, filing for bankruptcy may be the right option — your credit is going to take a hit anyway once the collection action is initiated.
Although medical providers can also get a judgment to garnish your wages if you are past due on medical bills, the automatic stay will halt such actions while you are in bankruptcy.
If you earn a small income and have few assets with little or no equity, then filing for Chapter 7 bankruptcy may be the best option for you. Medical debt is considered unsecured debt and will be discharged in Chapter 7 bankruptcy.
But if you aren’t eligible for Chapter 7 bankruptcy or have assets that you could lose under that chapter, filing for Chapter 13 bankruptcy may be the better option. In a Chapter 13 bankruptcy, you'll pay back the portion of the medical debt you can afford through a repayment plan. The remaining debt will be discharged once the case is finalized.
Filing for bankruptcy has the potential to wipe out your debt, and the sooner you act to take control of your medical debt, the sooner you can get back on the road to financial stability. When you turn to The Law Offices of Jonathan P. Shultz to get help with managing your medical debt, our compassionate and friendly staff will take the time to listen to your concerns and review all your options so you can make the best decision for yourself and your family.