Numerous experts agree that most Americans are one medical emergency away from financial ruin. According to a fairly recent report, the average person spends over $10,000 on health care costs a year -- this does not include insurance premiums. If you are like most New Jersey residents, you likely do not have $10,000-plus sitting around to pay your medical debt obligations in full. What can you do?
Millions of Americans are drowning in medical debt. When there seems to be no end or relief in sight, it is time to start looking at debt relief options. Bankruptcy, for example, is one way to rid oneself of medical debt entirely or, at least, make it less of a burden. So, which type of bankruptcy is best when dealing with medical debt?
Chapter 7 bankruptcy
Chapter 7 bankruptcy is often liquidation bankruptcy. If approved, some people have to give up certain assets in order to sell them and the funds used to pay creditors before the discharging of remaining qualifying debts. It is possible that less than 5% of people who utilize Chapter 7 actually have to give up some of their assets. Not all debts may qualify for discharge upon bankruptcy approval. Those that do not qualify include:
- Certain tax debt
- Child support
- Student loan debt
In order to qualify for this form of bankruptcy protection, your income has to be less than your necessary expenses. Most people do actually qualify for Chapter 7 relief. Those who do not may choose to pursue Chapter 13 relief instead.
Chapter 13 bankruptcy
This form of debt relief is for individuals whose income is high enough to meet their needs but not enough to pay their creditors. If your Chapter 13 petition receives court approval, it means that a debt repayment plan based on your income level will be in place for three to five years. You would make payments to a trustee who will then pass the funds on to your creditors. At the end of the repayment period, the remaining may qualify for discharge.
Which type of bankruptcy is best for medical debt?
Chapter 7 is ideal, but at the end of the day, whichever bankruptcy plan you qualify for is best. If you are not sure which type of bankruptcy would fit your needs, it is okay to seek advice on the matter. With the right assistance, you can make debt relief decisions that will help rid you of your medical debt and improve your overall financial situation.