A health crisis can quickly spiral into a financial disaster. If an individual or a family member falls seriously ill, caregivers might be forced to take time off work. Sometimes, this incident can lead to income loss or even job termination. With job loss often comes the loss of health insurance, intensifying the struggle to manage medical bills.
When the time comes that medical bills become insurmountable, the likelihood of filing for bankruptcy becomes one possible option that can help you get through it.
Bankruptcy is a legal process that offers a fresh financial start to individuals burdened by unmanageable debts. It involves either the discharge of debts (Chapter 7) or the creation of a manageable repayment plan (Chapter 13). However, while bankruptcy can provide relief, there are implications that you must weigh carefully before you push for it.
Assessing the severity of medical debt
Before considering bankruptcy, try to assess first the severity of your medical debt. Evaluate the total owed, including copays, deductibles and uncovered expenses. If the debt is substantial and poses a long-term financial strain, bankruptcy might be worth considering.
Even if you are eligible to file for bankruptcy, keep in mind that it isn’t the sole solution for medical debt. Reach out to health care providers and discuss options such as payment plans or negotiated settlements. Nonprofit credit counseling agencies can also provide guidance on managing debt without resorting to bankruptcy.
Impact on credit score
If you decide to go for bankruptcy, you must be aware that it may impact your credit score. This means that thinking long term, it may be harder for you to secure loans, mortgages or favorable interest rates in the future. So, be sure to consider the long-term consequences and whether alternatives might be less damaging to your credit.
Medical debt and bankruptcy type
If medical bills are the primary concern, Chapter 7 bankruptcy might be appropriate. It typically discharges unsecured debts quickly so you can start afresh. However, you might want to consider Chapter 13 if you have a regular income and can commit to a repayment plan for several years.
Amidst all this, don’t forget that bankruptcy also involves legal proceedings and paperwork. It is advisable to consult an attorney if you are not familiar with how bankruptcy works so you can go through the process smoothly.
Making an informed decision
Filing for bankruptcy to resolve medical bills is not a decision to be taken lightly. Evaluate the severity of your debt, explore alternative options and consider the impact on your credit and future financial prospects. Consulting professionals and understanding the legal dimensions can help you make an informed choice that aligns with your financial well-being.