Understanding Medical Bankruptcy
Medical bankruptcy is an informal term used to explain eliminating medical debt through bankruptcy, relieving financial stress caused by medical expenses. Consumer bankruptcy, which entails Chapter 7 and Chapter 13, is relevant here as it encompasses the broader context of bankruptcy types that can help manage various debts, including medical debt. With medical debt significantly contributing to financial challenges, it’s no surprise that nearly one-third of GoFundMe campaigns aim to help individuals pay their medical bills.
By filing for bankruptcy, individuals can alleviate the burden of medical debt, which is categorized as non-priority unsecured debt and can be discharged through the bankruptcy process. This option offers a suitable solution to those struggling with serious debt, allowing them to regain financial stability and peace of mind.
Consequences of Medical Bankruptcy
Medical bankruptcy can have notable consequences, including the potential loss of savings, assets, and even a home if the debt is substantial. The high costs associated with medical treatment can lead to considerable financial distress and even bankruptcy.
Additionally, bankruptcy impacts credit scores and future financial opportunities. The stress of managing debt can lead to anxiety, depression, and strained relationships.
Bankruptcy Options for Medical Debt
There are several bankruptcy options that you can file for when in medical debt; these include:
Chapter 7 Bankruptcy
Chapter 7 bankruptcy offers a swift way to eliminate most unsecured debts, including medical bills, typically within a few months. This process allows you to retain exempt assets such as your car, essential clothing, and household items. However, to qualify, you’ll need to pass a “means test,” which evaluates your household income and expenses against your state’s median income. Even medical bills paid via credit cards or personal loans can be released under Chapter 7.
