Sudden illnesses and major accidents can lead to enormous medical bills and the inability to return to work. Unfortunately, the cost of health care can leave many people in debt with few or no options for repayment. Declaring bankruptcy could serve as a financial lifeline by reducing or eliminating medical debt.
Filing Chapter 7 can provide immediate relief
When medical expenses keep adding up, it can feel like there is no way out. But there is a way for individuals to secure immediate relief from unsecured debts or loans that are not tied to collateral.
Those who qualify for Chapter 7 bankruptcy may be able to discharge debt such as school loans, credit card bills and medical expenses. Declaring bankruptcy also immediately stops most creditors from calling or collecting money, protecting the individual from harassing calls, emails and text messages.
With Chapter 7, individuals can become debt free of their medical bills within four to six months after filing. However, filing Chapter 7 bankruptcy is only available for people within a specific income bracket.
Passing the means test
To qualify for Chapter 7, the debtor, or person filing for bankruptcy, must first pass the means test. It entails examining the debtor’s income to see if it is lower than the Georgia median income for a household of their size.
If the debtor’s income is higher than the Georgia median, they may file for a Chapter 13 bankruptcy instead. This type of bankruptcy would entail paying off medical debt through a three to five-year repayment plan, depending on the debtor’s income.
Before filing for bankruptcy, it is important to seek counseling. This way, the individual may assess if declaring bankruptcy is the right option. For instance, the debtor may try to negotiate a repayment plan with their hospital or creditors.
Declaring bankruptcy can help significantly with settling medical debt, but it comes with consequences too. Though it does not happen all the time, debtors may have to sell their possessions to repay their debt. Consulting a bankruptcy attorney could help shed some light on what factors to consider before filing.