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Introduction
If you are overwhelmed by medical debt, you may be considering filing for bankruptcy. Bankruptcy can help you eliminate or restructure your debts, giving you a fresh start. However, you may be wondering if you can declare bankruptcy on medical debt. The answer is yes, you can file for bankruptcy on medical debt. In this article, we will discuss the process of declaring bankruptcy on medical debts, the benefits and consequences of declaring bankruptcy, and the frequently asked questions regarding the topic.
Can You Declare Bankruptcy on Medical Debt?
Yes, you can declare bankruptcy on medical debt. Medical debts are unsecured debts, which means they are not secured by collateral. Unsecured debts such as credit card bills, personal loans, medical bills, and utility bills can be discharged with bankruptcy. Medical debt is one of the most common reasons people file for bankruptcy.
There are two types of personal bankruptcy available in the United States- Chapter 7 and Chapter 13. Both chapters can help you get rid of medical debt, but the rules and procedures are different.
Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, you can discharge most of your unsecured debts, including medical bills. During the bankruptcy process, a trustee will liquidate your non-exempt assets to pay off your debts. However, most debtors are allowed to keep their necessary assets under state and federal laws.
To qualify for Chapter 7 bankruptcy, you must pass the means test. The means test is a formula that compares your income to the median income of your state. If your income is equal to or lower than the median income, you may qualify for Chapter 7 bankruptcy. If your income is higher than the median income, you may still qualify for Chapter 7 bankruptcy if you pass a disposable income test. The disposable income test examines your income and expenses to see if you have enough disposable income to pay off your debts.
Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, you restructure your debts into a payment plan that lasts three to five years. You may be able to discharge some of your medical debts, but you will have to pay a portion of your debts through the payment plan. The amount you have to pay depends on your income, expenses, and the value of your non-exempt assets.
To qualify for Chapter 13 bankruptcy, you must have a regular income and the amount of your debts must be within the limits set by the bankruptcy law. Chapter 13 bankruptcy requires a commitment to making monthly payments to a court-appointed trustee.
Benefits and Consequences of Declaring Bankruptcy on Medical Debt
The benefits of declaring bankruptcy on medical debt are significant. By filing for bankruptcy, you may be able to:
– Eliminate or reduce your medical debts
– Stop collection calls and harassment
– Stop wage garnishment
– Prevent litigation and judgments
– Get a fresh financial start
However, declaring bankruptcy also has consequences. Some of the downsides are:
– Bankruptcy will damage your credit score and make it harder to get credit in the future
– Bankruptcy will appear on your credit report for seven to ten years
– Bankruptcy can affect your ability to rent an apartment or get a job
– Bankruptcy may not discharge all debts, such as student loans or tax debts
– Bankruptcy may require you to liquidate some assets
Frequently Asked Questions (FAQs)
Q: What is medical debt?
A: Medical debt is debt arising from medical expenses, including doctor visits, hospital stays, surgeries, and prescriptions.
Q: Can you declare bankruptcy on medical debt?
A: Yes, you can file for bankruptcy on medical debt.
Q: What type of bankruptcy is suitable for medical debt?
A: Chapter 7 and Chapter 13 bankruptcy can help you eliminate or reduce your medical debt, but the rules and procedures are different.
Q: How does Chapter 7 bankruptcy work?
A: In Chapter 7 bankruptcy, you can discharge most of your unsecured debts, including medical bills. During the bankruptcy process, a trustee will liquidate your non-exempt assets to pay off your debts.
Q: How does Chapter 13 bankruptcy work?
A: In Chapter 13 bankruptcy, you restructure your debts into a payment plan that lasts three to five years. You may be able to discharge some of your medical debts, but you will have to pay a portion of your debts through the payment plan.
Q: What are the benefits of declaring bankruptcy on medical debt?
A: By filing for bankruptcy, you may be able to eliminate or reduce your medical debts, stop collection calls and harassment, stop wage garnishment, prevent litigation and judgments, and get a fresh financial start.
Q: What are the consequences of declaring bankruptcy on medical debt?
A: The downsides of declaring bankruptcy include damage to your credit score, bankruptcy appearing on your credit report for seven to ten years, affecting your ability to rent an apartment or get a job, not discharging all debts, and liquidating some assets.
Conclusion
Medical debt is a common cause of financial stress for many people in the United States. If you are struggling with medical debt, declaring bankruptcy may be a viable option to get a fresh start. Bankruptcy can help you eliminate or reduce your debts, stop collection calls, and get you back on track financially. However, you should weigh the benefits and consequences before deciding to file for bankruptcy. If you still have questions or need more information, you should consult a bankruptcy attorney to learn more about your options.
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Article Summary:
Bankruptcy can be an option for those struggling with medical debt, which is one of the most common reasons why people file for bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy can help eliminate or reduce medical debt, but the rules and procedures are different. Declaring bankruptcy on medical debt has benefits such as stopping collection calls and harassment, preventing litigation and judgments, and getting a fresh financial start. However, it also has consequences like damaging a credit score and affecting the ability to rent an apartment or get a job. It’s important to weigh the pros and cons before deciding to file for bankruptcy.
