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Medical debt can be its own animal when it comes to financial hardship. With all the changes in government and health care coverage, it’s difficult to know where your medical debt is coming from and going to.

How does medical debt happen and can bankruptcy help?

Personal bankruptcy is an option for overwhelming medical debt. One thing that is for certain is that medical debt has been the number one reason that Americans typically file for bankruptcy and continues to still be a high percentage of filings. Medical debt is known as unsecured debt which means property such as a house, is not pledged for collateral for payment. This later helps and plays a role in your repayment plan. Often times, medical debt can feel unavoidable even if you have good credit. Having an illness or any other reason for a hospital stay is unpredictable, which is why people find themselves in medical debt quickly and without resolve. If you’ve recently found yourself in medical debt, continue reading for some helpful guidance if you think personal bankruptcy is an option for you.

How does it happen (and fast too)? Let’s say you’re ill. Let’s say you have a baby. Perhaps you even have a long-awaited surgery to improve your standard of living. These are all possible reasons that a person may need to stay overnight at a hospital; which makes these all the possible ways medical debt can go up quickly and unexpectedly. Even with good health insurance, the insurance company only pays for a portion of the cost and you’re stuck with the rest. And if you happen to be one of the lucky ones, and a hospital stay isn’t needed, studies show that even a $500 medical bill is too much for the average person to pay.

It’s as simple as that, one visit, one stay, one surgery, and you could be in more medical debt than you ever thought possible. It happens that quickly and then typical Americans are stuck either having to settle with the hospitals or facing potential bankruptcy.

What does it mean for my credit score? Like any other debts, allowing your debt to remain unpaid means that eventually a collections or law suit could be filed against you. At this point your credit score will take a hit. If you choose to file bankruptcy of course your credit score will be negative impacted, the same as filing bankruptcy for any other reason. Before filing for bankruptcy, you may want to try negotiating a settlement with the medical provider or asking about assistance programs. If these options are still not feasible for you, the sooner you decide to file bankruptcy, the sooner you can be on track for credit recovery. Bankruptcy may stay on you credit score for 10 years, but that’s 10 years to start rebuilding your credit.

What are my options? A Chapter 7 and Chapter 13 bankruptcy are still available to you when you file. When you file a Chapter 7 your medical debt, like all unsecured debt, is wiped out in full. You may qualify for a chapter 7 if you don’t earn much money and have few to no assets with little equity. A chapter 7 is the best possible option when you have medical debt, because you don’t have to pay any of the debt back. However, if you don’t qualify for a Chapter 7, a Chapter 13 bankruptcy is still an option.

With a Chapter 13, you pay back a portion of the debt based on what you can afford, on an agreed upon repayment plan. The court will wipe out the remainder of the debt. If you earn too much income, or you have valuable assets that you could lose, this is when a chapter 13 is necessary. It may not seem like the better of the two, but it is still a better option than your wages being garnished due to unpaid debt.

Financial hardship as a result of medical debt can happen to anyone ant anytime. If your finances are spinning out of control and you are having a hard time making ends meet, personal bankruptcy may be an option. The Bankruptcy attorneys at Hines Law Offices can help by providing the right debt relief solution for your situation. Our full-service legal firm handles all types of debt relief matters specializing in Chapter 7 and Chapter 13 filings. Hines Law serving clients throughout Boston and beyond has over 13 years’ experience and has a high degree of success in helping clients obtain lasting debt relief. Call us today for a Free Case Evaluation!