But medical expenses are very common and often contribute to the overwhelming financial hardship that consumers feel. This may lead them to use Chapter 13 or Chapter 7 bankruptcy. Below are two reasons why medical debt shows up so often.
First and foremost, the sheer expense of medical care in the United States can be extravagant. Procedures could cost tens of thousands or hundreds of thousands of dollars.
At the same time, the United States does not have any type of universal healthcare. This means that those who get injured are dependent on their health insurance, which may not cover all of their costs – especially if they determine after the fact that some of those were “out of network” costs.
Another reason is that people who are facing a medical emergency often don’t think they have a choice. With some types of debt, the borrower is making a conscious decision to take on debt that later becomes unaffordable. An example of this could be someone who gets a car loan and then loses their job and can no longer afford the loan.
But with medical bills, people are just going to get the care that they need for themselves or a close family member. They don’t view this as a choice the same way it is a choice to buy a car – but they could end up with even more debt as a result.
If you find yourself in this position, be sure you understand how bankruptcy may be beneficial.
]]>Due to a variety of concerns, certain qualifiers for Chapter 7 should also potentially consider whether Chapter 13 might be a more advantageous route forward. If you qualify for Chapter 7 bankruptcy but you’re unsure of whether Chapter 13 might be a better fit, understanding the key differences and implications of each can help you make an informed decision that aligns with your financial situation and goals.
Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, allows individuals to wipe out eligible unsecured debts, such as credit card debt and medical bills, typically within three to six months. However, Chapter 7 may result in the loss of certain assets, as a bankruptcy trustee is empowered to sell nonexempt property to pay creditors. While this is a very rare turn of events, it is a risk.
Chapter 13 bankruptcy, on the other hand, is more of a reorganization of debt. It's designed for individuals with regular income who can pay back a portion of their debts through a repayment plan over three to five years. Chapter 13 allows debtors to catch up on missed mortgage payments, car loans and other secured debts, potentially preventing foreclosure or repossession.
Ultimately, if you own significant nonexempt property that you wish to keep, Chapter 13 provides an avenue to do so, as you'll repay debts over time rather than risking liquidation of your assets to pay creditors. Additionally, if you’re trying to prevent repossession or foreclosure, Chapter 13 may be a preferable alternative.
With all of this said, everyone’s situation is different. As a result, it may benefit you to seek legal guidance so that you can better ensure that you’re empowered to make an informed decision about your unique circumstances.
]]>This stay halts most collection activities, including garnishments and foreclosure proceedings. It provides a period of relief during which creditors can’t proceed with collection actions, allowing the debtor to reorganize or discharge their debts under bankruptcy.
The automatic stay immediately stops garnishments, which are court orders allowing creditors to take money directly from a debtor's wages or bank accounts. This can provide significant relief to debtors, as garnishments can severely impact their ability to meet essential living expenses.
In the case of foreclosures, the automatic stay can temporarily halt the process, giving the debtor time to either negotiate with the lender or reorganize their finances. The impact of bankruptcy on foreclosures can vary depending on the type of bankruptcy filed and the specific circumstances of the debtor.
While bankruptcy can stop most garnishments, it's important to note that certain types may not be affected. For instance, garnishments for child support or alimony obligations typically continue, as these are considered priority debts. Still, those related to credit card debts, medical bills and personal loans will likely be halted.
Chapter 13 bankruptcy allows debtors to reorganize their debts and create a repayment plan, including past-due mortgage payments. The debtor can avoid foreclosure and keep their home by catching up on these payments over time.
Under Chapter 7 bankruptcy, the automatic stay can temporarily stop foreclosure. It may not provide a long-term solution if the debtor can’t catch up on their mortgage payments.
Understanding exactly how bankruptcy will affect a specific situation is critical, so anyone in this position should work with someone familiar with these matters.
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