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How Bankruptcy Can Help with Medical-Related Debt

  • When illness strikes, it can be devastating for your body, and it can wreck your finances as well.  A major illness or serious injury can mean lost income from being unable to work; and, even with insurance, you may have co-payments, deductibles, and other strains on your resources. Even if you’ve always been financially stable, if you’re hit with a major medical problem, bills may mount up quickly to where you can no longer meet them.


    People often take on additional credit-card debt to cover mounting medical bills; and since credit cards often charge high interest rates for unpaid balances, debt continues to rise.  As a result, people deplete their savings and wind up unable to pay for necessities such as rent, food and utilities.


    It’s no wonder that medical bills are the most common cause of people filing for bankruptcy in Ohio and is the lead factor in more than a quarter of bankruptcies in the United States. According to findings from NerdWallet Health,  bankruptcies resulting from unpaid medical bills affected nearly 2 million people, even many with health insurance.


    Bankruptcy Can Offer a Way Out of Medical Debt


    Filing for bankruptcy can be a way to discharge medical debt that has mounted to a level where one is unable to pay it off.  In many cases, medical debt can be completely discharged at the completion of the bankruptcy.


    Types of Bankruptcy


    There are two major types of consumer bankruptcy, Chapter 7 and Chapter 13.


    Chapter 7 Bankruptcy will discharge (eliminate) most or all consumer and/or business debts so they do not have to be paid, and medical debts are among those that will be eliminated. This includes doctor and dentist charges, hospital costs, testing expenses, and any other medical-related charges that you have.


    Chapter 7 bankruptcy is over in a few months, and you can begin rebuilding credit quickly. You might have to sell property to help pay creditors; but there are Ohio bankruptcy exemptions for property that cannot be sold, including clothing, cars, work equipment, and household furnishings. It's possible that your possessions may all be exempt, qualifying you for a “no asset” case. Once you file, an “automatic stay” goes into effect, and creditors and collection agencies can no longer call, contact, or harass you or proceed with any lawsuits or garnishments against you.


    Chapter 13 bankruptcy is a court-approved reorganization plan that allows you to consolidate your payments to avoid fees and fines and repay some or all of your debt affordably over a three- to five-year period. Your medical bills will be included in the plan; and as long as you make the required monthly payments, the creditors will not be able to contact or harass you. At the end of your bankruptcy period, any remaining debt will be discharged or eliminated.


    Find An Experienced Attorney


    Many things can go wrong if you file for bankruptcy without knowing what you’re doing. Working with an experienced bankruptcy attorney ensures that you won’t make critical mistakes that end up costing you money. Missteps can also lead to a loss of nonexempt assets, denial of discharge of debt or result in criminal charges for fraud.


    When you’re considering your options, consult a bankruptcy attorney to learn the best path forward. An attorney can help you plan out the process and tell what you can and can’t do when filing for bankruptcy.


    When looking for a bankruptcy attorney, make sure they can practice in your state and that they specialize in bankruptcy. The more knowledgeable an attorney is about the bankruptcy process, the more effective they’ll be in seeking every advantage for their clients.