While politicians and economists continue their debate over the state of the U.S. economy, consumers are still having a hard time paying their bills. In fact, one form of personal debt that has received national attention over the past few years is medical debt.
The rise in medical debt is mainly due to workers losing their jobs and their health insurance benefits. Unfortunately, the trend of rising health care costs continues to go up.
The Center for Studying Health System Change released a report in December 2011 showing that one in five families were having trouble paying their medical bills and 25 percent considered filing for bankruptcy.
A Deloitte Center for Financial Services survey found that one in seven Americans who once had stellar credit reports were not able to pay their credit card and medical bills. The survey, conducted in August 2010, said that over the last two years, 22 percent of Americans with bank accounts had a “serious negative credit situation.” Of that number, 11 percent of the respondents said this was the first time they had experienced a delinquency.
As chronic illness causes medical bills to mount and the chances of finding new jobs are getting slimmer, many people are considering filing for Chapter 7 bankruptcy to help resolve their financial dilemma.
What is Chapter 7 bankruptcy and how will it help with medical bills?
Chapter 7 bankruptcy allows people to eliminate unsecured debts such as medical bills, personal loans, credit cards and cards from retail stores. A chapter in the U.S. Bankruptcy Code states that discharging certain debts to give “honest debtor a ‘fresh start'” is one of the primary purposes of bankruptcy. Both the federal government and individual states have bankruptcy laws which list the types of personal property that is exempt from seizure by creditors.
Generally, people who are chronically ill or have a family member who is chronically ill, are either limited in the amount of work they can do or are not employed at all. Therefore, their medical, household and personal expenses accumulate to a point where they fall behind and find it difficult to make monthly payments. They either make a bare minimum payment or default on their debts.
Chapter 7 allows individuals with very few assets to have their medical and other eligible debts discharged so that they are no longer responsible for those expenses. Moreover, creditors are also prevented from taking collection action on the discharged debts.
Before the debts are discharged, however, individuals must file a petition for bankruptcy in the bankruptcy court in their area. Besides the petition, the bankruptcy court requires other documents from filers, including:
1. A list of all creditors and the amount of money that they are owed.
2. The source and amount of the debtor’s income.
3. A list of all the debtor’s assets, such as homes and vehicles.
4. A list of the debtor’s monthly expenses, including medical bills, food, clothing, transportation.
It is best to hire a reputable bankruptcy attorney who can advise you and represent you in court. Having a qualified legal advocate takes the stress off of you so you will not have to worry about paying your medical bills but focus on your physical and financial recovery.