What happens if you lose your job and medical insurance coverage, or if your current insurance only covers certain treatments? Other insurance plans may only provide 80 percent coverage of treatment. For those who have elderly parents or if you or a loved one suffered a catastrophic injury, you may be accumulating thousands of dollars in medical bills for which there is no realistic way you could ever pay over your lifetime. Maybe it is time to investigate bankruptcy options available to you.
If you have owed a certain medical facility for months, you may be receiving calls and letters from collection agencies who can be relentless. Should medical bills be causing you financial as well as emotional distress, you may want to consider filing for bankruptcy protection
What Can Bankruptcy Do?
There are two filings that consumer debtors have available if overwhelming medical expenses are giving you more than just a headache. There is Chapter 7, which is a liquidation of debt, or Chapter 13, which is a reorganization of your finances and debts and a repayment plan, at least to secured creditors over a 36 or 60-month period.
Under either filing, an automatic stay goes into effect. This means that no creditor or collection agency can contact you by phone, letter, email or personally to discuss your debt; nor may any collection activities such as garnishments or levies continue to deplete your paycheck or bank account any longer.
Effect of a Chapter 13
Chapter 13 provides for a repayment plan to your creditors. Consumers who choose Chapter 13 do so if they wish to more quickly restore their credit score or status since most creditors will be paid under this plan except for unsecured ones who are given the lowest priority. This is also a recommended plan for homeowners who are in arrearages on their home loans and are facing possible foreclosure but who have a steady and secure income; or who may possess other expensive personal property such as boats or even non-homestead real property that is subject to being seized by the bankruptcy Trustee and sold off.
In these cases, the consumer debtor can present a workable and approved repayment plan that allows them to continue making their mortgage payments while paying off the arrearages over the life of the repayment plan while keeping all their property. For medical bills, they are included in the plan as unsecured debt but the creditors may be paid back but at far less than what is owed.
Effect of a Chapter 7
You do have to meet certain criteria to file a Chapter 7. Your income cannot be over your state’s median or your disposable income must meet a means test. Also, if you filed a Chapter 7 before, you have to wait 8 years before you can file a Chapter 7 again If you qualify, then you will likely be able to discharge all the medical bills that you have incurred and be able to keep most if not all of your assets and property. Consult your state’s exemption laws or speak to a bankruptcy attorney in your area for more information.
If you are continuing to accumulate medical expenses, you may want to consider waiting until your treatment is completed so that those bills may be included as dischargeable debt as well.