Discharging Medical Bills with a Bankruptcy: What are the Rules?
The health care system has gotten out of control, with expenses skyrocketing and insurance coverage falling steadily. More and more people are paying out of pocket for their medical expenses, or they are getting hit with giant bills for what insurance does not cover. People are maxing out their credit cards, launching Internet campaigns, and selling what they can to pay off their spiraling medical debt.
Excessive medical debt is one of the top reasons that people file for bankruptcy in Arizona. Fortunately, in many cases, bankruptcy can eliminate medical debt or can make it more affordable to repay. Here’s what you need to know if you are thinking of calling a bankruptcy law office to deal with your medical debt:
The first thing your Mesa bankruptcy lawyer will do is assess your finances, including your debts and your assets. Your debts will be organized according to whether they are priority debts or non-priority debts. Balances like back taxes or child support are considered priority debts since they cannot be discharged. Any income or assets you have available to pay your creditors will be diverted to these debts first.
Medical debt is considered non-priority debt. Unless you have a lot of assets, it’s likely that your medical debt will be discharged in a bankruptcy filing.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy in Mesa is considered a “clean slate” bankruptcy because it completely eliminates unsecured, or non-priority, debt such as medical bills and credit card bills. So even if you have charged some of your medical bills to your credit cards, you can still completely eliminate your medical debts with a Chapter 7 bankruptcy filing.
However, you must first meet eligibility criteria before you can file for Chapter 7 bankruptcy. You have to show that your disposable income falls below a certain threshold and that you do not have more than the allowable assets.
Chapter 13 Bankruptcy
If you can’t qualify for Chapter 7 bankruptcy, you might consider filing for Chapter 13 bankruptcy. Under Chapter 13 bankruptcy, your income and debts are analyzed to determine an affordable payment plan over a three- to five-year period. You are ordered to pay a single amount each month, which is then distributed to your creditors.
The amount you pay each month under a Mesa Chapter 13 bankruptcy plan include a pro rata amount for each creditor. Your priority creditors are paid first and then your non-priority creditors. The bankruptcy trustee will determine how much you can pay, so you if you don’t make enough, you may not qualify to file for Chapter 13 bankruptcy. However, if you do qualify and you complete your repayment plan, whatever remains of your original debt will be discharged. It is most likely that you will end up paying very little toward your original medical debt compared with your other debts.
Determining whether bankruptcy is right for you, and which kind of bankruptcy might be right for you, requires you sitting down with an experienced bankruptcy lawyer and analyzing your financial situation. Your Mesa bankruptcy attorney will help you understand the different options and how each of them can help you. The goal would be to get the maximum debt relief you can under bankruptcy protection.
Don’t let medical bills ruin your life. Before you start liquidating assets or running up credit cards, visit a bankruptcy law office to talk about your options. You may be able to discharge that medical debt before it has a chance to bring down your finances or sink you into greater debt.
If you are struggling with medical bills or other debt, contact My AZ Lawyers to talk to an experienced bankruptcy lawyer. We’ll analyze your finances and help you understand how bankruptcy may be able to help you. We help individuals file for Chapter 7 bankruptcy and Chapter 13 bankruptcy, and we help business clients interested in bankruptcy also. We serve clients in the Mesa, Glendale, Tucson, and Phoenix areas, and we have a reputation for excellent service and efficient results. Contact us today to talk with a bankruptcy attorney about your options for bankruptcy and how you may be able to get the debt relief you need.
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