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Crushing medical bills: When might bankruptcy be the answer?

On Behalf of | Apr 4, 2024 | Chapter 7 Bankruptcy

The high cost of healthcare in the U.S. is a well-documented problem. Even with insurance, deductibles and copay bills can quickly leave patients facing financial ruin. For those without insurance, the situation is even more dire. A single hospitalization can result in a debt so large it becomes almost impossible to manage, especially when combined with everyday living expenses.

Beyond the immediate financial strain, medical debt can have a domino effect. Wages may be garnished, essential utilities shut off and even housing security may be at risk. This constant pressure can lead to anxiety, depression and a decline in overall well-being. If you’re facing such overwhelming challenges, you might want to consider bankruptcy.

What are your options?

Two main chapters of the bankruptcy code can help to address medical debt: Chapter 7 and Chapter 13. In Chapter 7, a court-appointed trustee may be empowered to sell non-exempt assets to pay creditors a portion of what you owe. However, most medical debt is considered unsecured debt, meaning it’s not tied to a specific asset. This can allow for the remaining medical debt to be discharged, essentially erased.

Chapter 13, on the other hand, is a reorganization plan. The debtor proposes a repayment plan, typically lasting 3-5 years, where a portion of their income goes towards paying creditors. While some medical debt may still be owed at the end of the plan, a significant portion can be eliminated.

Choosing the right path requires careful consideration. Chapter 7 offers a quicker solution but may not be suitable for everyone; individuals with significant assets may not qualify. Conversely, Chapter 13 can allow you to keep your assets but requires a longer commitment.

Bankruptcy can be a powerful tool, but it shouldn’t be taken lightly. It’s important to explore all other options first, such as:

  • Negotiating payment plans with medical providers
  • Seeking charity care
  • Applying for government assistance programs

However, when those efforts fail, bankruptcy can offer a lifeline for those drowning in medical debt. It provides a chance for a fresh financial start, potentially allowing individuals to focus on their health and well-being without the constant threat of financial ruin.

Remember, medical debt shouldn’t force you into a corner. Understanding your options and seeking legal guidance can empower you to navigate this difficult situation and find a path toward financial recovery.