Medical Debt and Bankruptcy – How does it work?

by | Mar 5, 2012 | Law And Politics

The assumption of many is that people hire a Bankruptcy Attorney in Turnersville due to loss of a job or excessive credit card spending. However, did you know that the most common cause of bankruptcy filings across the country is due to overwhelming medical debt? According to the American Journal of Medicine, over 60% of bankruptcy claims filed in the United States are due to health care bills and costs which people simply can’t afford to pay. It is due to these medical bills that many people suffer by making choices of whether to pay their hospital bill or cover the mortgage each month.

Even people who are covered by medical insurance through their employer are not immune to incurring outrageous medical expenses. When people miss work due to illness, this leads to a significant reduction in revenue which pays for simple necessities like food, water, shelter, clothing and child care. High deductibles, co-payments and several other loopholes in the medical billing system have literally caused more Americans to file for Bankruptcy protection than any other specific reason. By filing for bankruptcy protection due to medical costs, your medical bills are often entirely liquidated or significantly reduced which will provide you to begin the healing process without the stress of knowing how you are going to keep the lights on in the house.

There are two traditional ways to file for bankruptcy protection due to medical expenses. When you hire a bankruptcy attorney in Turnersville and file chapter 7 bankruptcy the Federal Government liquidates all unsecured debt; including medical debt. When you file for Chapter 7 bankruptcy, you are limited to doing so only once in a six year period. If you acquire more medical expenses during that 6 year time period, you might be liable for paying those expenses. Also, if you own assets, the Federal Government has the right to seize these assets in order to pay for your unsecured debt.

The other option is to file for Chapter 13 protection due to overwhelming medical expenses. This option is best suited for people who have steady income, can afford to pay their monthly obligations and still meet a monthly payment to consolidate debt through a Federal Court supervised repayment program. This program allows people to repay all or a percentage of their debt over a three to five year period. Chapter 13 also allows individuals to keep your property during this time period, which is a welcome relief for people who are trying to heal from existing medical conditions.

As the medical industry goes through its most troublesome period in the history of this nation, the people who continue to suffer are the people who are forced to pay outrageous medical expenses and simply can’t afford to live with the amount of debt they have acquired during the healing process. Medical bills are growing, and your revenue is shrinking due to missing more time at work, the best solution might be to file bankruptcy. Hiring a bankruptcy attorney in Turnersville is a great first step to begin the road to economic recovery.


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