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Medical Debt: Is Bankruptcy the Answer?

Medical Debt: Is Bankruptcy the Answer?

: Richard West Law Office

medical debtWith the rising cost of healthcare, expensive hospital stays and medical bills can corner people into compromising financial situations. Medical debt has been an increasingly difficult problem for many people, but the good news is that there are ways out. If your medical debt is severe, and you cannot settle the debt with your creditors, Ohio bankruptcy may be the option you are looking for.

Discharge Medical Debt

For those with high medical debt, there are a couple of bankruptcy options you could potentially pursue. Each offers different relief options and comes with a unique set of rules and stipulations, but they could offer you relief with your debt issue. The two options are Chapter 7 and Chapter 13 bankruptcy.

The Fine Print

The first key to understanding bankruptcy is to understand the difference between secured and unsecured debts. Essentially, secured debt is a debt which is secured by the item itself. A lien on a property is secured by the property itself, so it could be taken by the creditor. This makes it a secured debt. On the other hand, an unsecured debt is one that is not secured by tangible property. These unsecured debts are further divided into priority and nonpriority. Medical debt falls under the latter: nonpriority unsecured debt.

Chapter 7 and Chapter 13

Under Chapter 7, medical debt can be totally wiped out, but you must qualify. In order to pursue Chapter 7, you will likely need to have little to no income and minimal assets. Because medical debt is classified as a nonpriority, Chapter 7 will pay a portion of your debt in bankruptcy and likely wipe out the rest upon receiving the discharge.

If you hold major assets that you would not want to lose under Chapter 7, chapter 13 may be for you. While Chapter 13 will not completely let you off the hook, it can help you by creating a repayment plan with your creditors. It also has the ability to discharge some of the debt.