Bankruptcy or insolvency occurs when an individual or business is unable to repay necessary debts owed to creditors. Generally imposed as a court order, bankruptcy is often the result of financial distress on the part of a debtor. Nobody wants to file for bankruptcy. It is a giant decision that requires the skilled council of an experienced attorney who specializes in bankruptcy litigation. The experienced Los Angeles Bankruptcy Attorneys at the Law Offices of I Los Angeles Bankruptcy Attorneys will support you through the process of bankruptcy and will guide you back to the brink of financial stability. For a free consultation with one of our bilingual staff members, please call us today at (213) 699-3055.
The cost of medical care in the United States is exorbitant, and medical debt is an increasing concern for Americans. According to a study published in July 2021, nearly 18% of Americans had medical debt in collections in June 2020. And between 2009 and 2020, unpaid medical bills became the largest source of debt...
The cost of medical care in the United States is exorbitant, and medical debt is an increasing concern for Americans. According to a study published in July 2021, nearly 18% of Americans had medical debt in collections in June 2020. And between 2009 and 2020, unpaid medical bills became the largest source of debt Americans owed to collections agencies. For people struggling with significant medical debt or other types of debt, filing bankruptcy may be the best option for discharging those debts or creating an affordable plan to repay the outstanding balance over time. There is no such thing as declaring medical bankruptcy, but medical debt can be discharged through regular Chapter 7 or Chapter 13 bankruptcy proceedings.
Bankruptcy is a legal proceeding designed to help individuals overwhelmed by debt cancel all or most of their outstanding debt and get a fresh financial start. However, not all debts are treated the same way in a bankruptcy proceeding, and understanding how your specific debts will be handled during your Chapter 7 or Chapter 13 bankruptcy is the key to determining whether bankruptcy is the right choice for you.
When you file bankruptcy, the debts you owe will be prioritized, or categorized based on their significance, by the court and bankruptcy trustee. Priority debts, like child support, alimony, and unpaid federal tax payments, are considered top-tier debts. They cannot be discharged in bankruptcy and will take priority over other competing claims by creditors in your bankruptcy case. Non-priority debts include the majority of unsecured debts, which are debts that don’t involve any collateral. Medical debt is categorized as non-priority unsecured debt and it can be discharged, or eliminated, in bankruptcy. So can other types of non-priority debts that are not secured by collateral, including credit card debt, outstanding personal loan payments, and unpaid utility bills.
Many secured debts, such as mortgage or car loans, can be discharged in bankruptcy as well, but how these debts are treated depends on the type of bankruptcy you file. In a Chapter 7 bankruptcy case, your obligation to repay the debt is discharged, but the creditor retains the right to seize the property securing the debt. In a Chapter 13 bankruptcy case, you may choose to keep the property, cure your default, and continue making regular monthly payments under the court-approved repayment plan. Otherwise, you will have to return the property to the lender.
There are several factors you will want to consider before deciding to file bankruptcy to wipe out your medical debt.
Was the medical debt incurred before you declared bankruptcy?
Any medical debt you incur prior to filing bankruptcy is wiped out when you obtain your bankruptcy discharge. This includes any medical bills you receive after your bankruptcy case is initiated, so long as the treatment happened before you filed.
Can you pay off the medical debt in a reasonable amount of time?
If you can afford to make monthly payments and pay off your medical debt in one year, filing bankruptcy may not be necessary.
Do you qualify for Chapter 7 or Chapter 13 bankruptcy?
If your income is low enough that you can file Chapter 7 bankruptcy and wipe out your medical bills and other debts quickly, this might be the best option for you. If you are restricted to Chapter 13 bankruptcy, you can still eliminate some or all of your medical bills, but you may be required to pay whatever debts you can afford, including medical bills, in monthly installments under a court-approved repayment plan.
Do you have other debts that are eligible for discharge?
If you only have medical debt, you can still file bankruptcy and have your debt discharged. However, declaring bankruptcy may be even more beneficial if you have other unsecured or secured debts that also qualify for discharge.
Do you have other debts that are eligible for discharge?
There are many different alternatives to bankruptcy that may be worth exploring fully before filing. This should be a first step when considering bankruptcy. You may be able to solve your problem without cratering your credit profile.
Costly medical bills are often unexpected, and they can accumulate quickly. Unfortunately, more than one-third of Americans say they do not have the disposable income to pay for an unexpected medical emergency costing more than $400. If you or a loved one is in need of emergency medical care, figuring out how you are going to pay the hospital bill when it comes due may take a back seat to ensuring that you get the treatment you need. If you accumulate significant medical debt and you are unable to pay your bills on time, you may find yourself considering bankruptcy as a means of wiping out your debt. In fact, having unpaid medical bills is one of the most common reasons people seek debt relief through bankruptcy.
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