No matter how carefully you budget and save, a medical crisis can change everything. You may be unable to pay your medical bills, especially if you can no longer work.
Filing for bankruptcy is a difficult decision, but if you are struggling due to circumstances beyond your control, it can help you protect your assets and your health.
What is medical debt?
Medical debt accounts for around two-thirds of bankruptcy claims in the United States.
Medical bills are unsecured debt, which means they do not involve collateral. Many people with medical bills incur additional unsecured debt by using credit cards and loans to pay for care.
When should you file Chapter 7 bankruptcy?
If you do not have the means to pay your debts, Chapter 7 bankruptcy can eliminate your unsecured debt.
To be eligible to file for Chapter 7, you must pass the means test. The court will evaluate your income and expenses to determine whether you have disposable income to pay part of your medical bills. If you do, you may need to file Chapter 13 instead.
When should you file Chapter 13 bankruptcy?
If you are still able to work, you may be eligible for Chapter 13 bankruptcy.
Rather than dismissing your debts, Chapter 13 restructures them, allowing you to pay a portion of what you owe over three to five years.
Paying debts under Chapter 13 can be tough. You must dedicate all disposable income to repayment. However, it can reduce the stress of medical bills, as creditors will not be able to pursue collection efforts against you.
If you are recovering from a medical crisis, more stress is the last thing you need. Bankruptcy can alleviate the burden of debt so you can focus on what truly matters, your health.