With increasing frequency, Americans are having trouble paying off their medical bills. With unemployment continuing at high rates, there are many who lack health insurance. Medical bills and hospital bills can be difficult to repay following an unexpected medical emergency.
More than ever people are turning to credit cards to pay for their medical bills. Yet high credit card interest rates can be disastrous and combined with late penalties and fees can make paying off the debt impossible.
Roughly 20 percent of people seeking credit counseling in 2011 said medical bills were the main reason that they decided to file bankruptcy, according to CredAbility, a nonprofit credit counseling agency. Underscoring the increasing problem, this number had increased approximately 13 percent from 2009 to 2010.
Bankruptcy as an Option
A viable solution for those with medical bills that they cannot afford to pay is bankruptcy. Typically, there are two types of bankruptcy that an individual can file: Chapter 7 and Chapter 13.
In Chapter 7 bankruptcy, a trustee sells all of the debtor’s non-exempt property. The debtor receives a discharge once the sale is completed. Any non-secured debts not covered by the proceeds of the sale are discharged.
Contrary to popular belief, a debtor does not lose all his or her property in a Chapter 7. Generally a house, car and furniture are exempt from sale. However, a Chapter 7 bankruptcy will not stop a foreclosure.
If the debtor has regular income, Chapter 13 bankruptcy might be a good option. Under Chapter 13 a debtor repays all or a portion of his or her debts under a repayment plan over a three to five year period. Once the debtor makes the required payments, the remaining debt is discharged.
Chapter 13 bankruptcy also stops a pending foreclosure. In many cases, it can also discharge the debt of a second mortgage.
The bankruptcy process is very complex. If you are financially overburdened with medical bills and are considering bankruptcy, it is important to consult with an experienced bankruptcy attorney. An Orlando bankruptcy attorney can discuss bankruptcy and other debt-relief options and recommend a solution based on your individual circumstances.