Like most Americans, you may be carrying a lot of debt. A mortgage, car payments, credit card payments, utilities, and living expenses take up most of your paycheck, leaving little for savings.
So what do you do when an unexpected medical expense pops up and adds several thousand dollars to your monthly payments?
Bankruptcy may provide a new financial start
Bankruptcy is a process that allows individuals or businesses to get relief from their unpaid debts. There are two types of bankruptcy:
- Chapter 7 is also known as straight bankruptcy or liquidation bankruptcy. Under this type of bankruptcy, the debtor’s excess assets (if there are any) are sold off, and the proceeds are used to pay creditors. The debtor is then released from their obligations to repay any remaining debts.
- Chapter 13 bankruptcy allows the debtor to keep property that might otherwise need to be sold and reorganize their debt to pay off their creditors with a court-approved repayment plan.
It’s worth noting that the vast majority of debtors file for Chapter 7 and don’t have any assets that the court will take.
Many people are ashamed of declaring bankruptcy, but it is a very common occurrence. There are many reasons why people may file for bankruptcy, with the primary reason being a loss of income, followed closely by medical debt.
Bankruptcy allows you to wipe out your debt and gives you a chance to reorganize and rebuild your finances. It can also stop creditors from harassing you and give you some much-needed breathing room.
If medical expenses have you facing crushing debt, it is important to discuss your situation with someone. You need to consider your options and decide if bankruptcy is your best solution for a fresh start.