It seems that more Americans are facing complex medical procedures and rising healthcare costs than ever before. With the increasing costs of medical treatment and the possibility of income shortfalls from divorce, layoffs or housing emergencies, more and more families in the United States face financial peril at every turn.
In a world where there seems to be less and less financial margin for error, healthcare costs tend to be one of the single biggest debts Americans face. While the statistics are often inconclusive, there is no doubt that many individuals who file for bankruptcy cite medical debt as a contributing factor in their decision.
While there is no such thing as a “medical bankruptcy” in the Bankruptcy Code, individuals can seek debt relief from either Chapter 7 or Chapter 13.
- Chapter 7 is generally considered “debt elimination” bankruptcy as the goal is for debtors to get their unsecured debt discharged at the end of the process. Unsecured debt can include medical debt, credit card debt and any personal loans. For secured debt including a car loan or a home mortgage, you will need to continue making payments to protect those assets.
- Chapter 13 is generally considered “debt reorganization and repayment” bankruptcy. The repayment plan lasts from three to five years based on your income and typically entails you to pay a portion of your overall debt but not the full amount. If the repayment period is successfully completed, the remaining unsecured debt, including medical debt, is eliminated.
If you are facing significant medical debt, it is wise to carefully consider your options at the earliest time. Letting debt mount can only complicate your situation and make things more challenging for you in the future. As every situation is different, it is wise to discuss your case in detail with a skilled bankruptcy firm.