Unexpected, out-of-pocket medical expenses can become a significant financial burden that can back many Americans into a corner. The more such expenses pile up, the more likely it is that affected individuals will be overwhelmed by insurmountable medical debt.
Medical debt can make the lives of even the most financially aware individuals spiral out of control. Thankfully, unexpected medical emergencies don’t have to be the end of financial stability. By exploring bankruptcy, individuals who are overwhelmed by medical debt can seek a fresh financial start.
The burden of medical debt
The trickiness of medical debt is in the fact that it arises from unexpected emergencies or unforeseen illnesses that individuals couldn’t have known to prepare for financially. Having to deal with costly treatments can quickly deplete:
- Insurance
- Deductibles
- Co-pays
Furthermore, uncovered services can leave individuals with substantial medical bills that interfere with their monthly budget. The never-ending out-of-pocket expenses can quickly pile up, leading to unmanageable debt, which may affect an individual’s:
- Credit scores
- Ability to obtain more loans
- Overall financial stability
It’s also worth remembering that, unlike credit card debt or loans, medical debt is unique because it is often involuntary. Individuals who unexpectedly get ill may have no other choice but to accumulate medical debt to save their lives. Unfortunately, the financial burden can be overwhelming, and this is where bankruptcy comes in as a solution.
Choosing between Chapter 7 and Chapter 13
Individuals grappling with medical debt can file for Chapter 7 or Chapter 13 bankruptcy for financial relief. Once the bankruptcy filing is complete, an automatic stay is activated, which protects the individual from any debt collection efforts from debtors. Thus, they can have some breathing room to restructure their finances and regain stability while gradually paying off their debts.
By filing for Chapter 13 bankruptcy, individuals get help from the bankruptcy court to establish a repayment plan that allows them to use a portion of their monthly salary to gradually pay off their loans. In the case of Chapter 7 bankruptcy, individuals may be lucky to have their medical loans discharged as unsecured debts.
When overwhelmed by medical debt, individuals may feel like there is no pathway to financial recovery. However, with reliable legal support, they can choose a suitable debt management plan that aligns with their specific goals, needs and circumstances.
