Medical debt is one of the most common causes of bankruptcy. With the ever-rising costs of medical care, more and more people find themselves in debt for a variety of medical procedures. Medical debt is not only a problem for those without insurance. In fact, many people who have medical insurance have ended up in bankruptcy court due to deductibles, copays, and the expense of medical care that is not covered by insurance. For those feeling buried in medical debt, there are a number of different bankruptcy options to consider.

Chapter 7

Chapter 7 bankruptcy wipes away all a person’s unsecured debts which according to bankruptcy attorneys, makes it the most common type of bankruptcy filed in the United States. This includes medical debt. All debts are included together, and there is no distinction between medical and other types of owed money. There are certain income guidelines that people need to meet to qualify for Chapter 7 bankruptcy. The income guidelines vary depending on geographic location and based upon the average income in the area and the local cost of living. The court will consider a person’s income and debt amounts to make a decision whether or not to allow the debts to be discharged.

 

Chapter 13

In Chapter 13 bankruptcy, the court looks at both a debtor’s debt and income to determine a new debt amount. The court then also sets up a payment plan for the debtor. Medical debt can be discharged or reduced in a Chapter 13 bankruptcy. It is important to note that the amount of debt that can be discharged in a chapter 13 bankruptcy is capped at an amount that changes periodically. However, the limit is quite large at about $400,000.

 

Debt Settlement

For those who have some ability to pay, debt settlement may be an option to consider. Debt settlement involves negotiating with the creditors to lower the amount of debt that is owed. This is a common practice with medical debt, but it is not always easy to do. Settlement is particularly difficult when the debt is owed to various creditors.

 

The decision as to whether to file for bankruptcy or not, and what type of bankruptcy to pursue can be a difficult one. However, an experienced attorney can help to make an informed decision based upon specific needs. An experienced bankruptcy attorney will be familiar with the local laws and regulations and can provide a wealth of knowledge to help those who are in debt to make the right decision. No matter what medical situation you face, paying it all back is possible, and bankruptcy can be a good route to go when overwhelmed with payments.