Discharging medical debt
While many people have been struggling with making ends meet during hard economic times, the ongoing health crisis has also left many with mounting medical debt and no way to pay it off. For Americans who have either fallen ill or had to take care of a loved one, a change in copays or reduced health coverage can make medical costs impossible to pay off.
When tragedy strikes and a family member becomes ill, mounting medical bills and hidden charges can destroy a family’s hard-earned savings, forcing them to try to get by on credit.
For Southfield and Detroit area residents, getting trusted legal counsel is an important step in helping you to create a comprehensive relief strategy so that you can manage your current financial state. Some bankruptcy solutions include a discharge of medical debt or ways of managing unsecured debt over time.
Medical debt on the rise
Even before the current health crisis, many families were having difficulty being able to pay off medical debt. According to the Kaiser Family Foundation, over 25% of Americans faced difficulty managing medical debt in 2016. And in almost half of all medical bankruptcy cases in the United States, hospital bills are cited as the greatest expense.
Medical debt affects all age groups, regardless of education or income level. More than 60% of Americans who are saddled with medical debt have attended college, almost 50% are married, and of those, over 20% are military families. More than half of people who have medical debt do not list any other debts on their credit reports.
Debt relief of unsecured debt
Medical debt is classified as unsecured debt, and it may be discharged during a Chapter 7 bankruptcy filing. A means test determines whether a debtor’s income falls below the threshold, set by state statute, for being able to repay medical debt. It also examines the debtor’s other assets to decide whether or not they have the disposable income to be able to repay a portion of the debt.
Even if you do not qualify for Chapter 7, a Chapter 13 bankruptcy will restructure debt so the debtor can manage debt repayment over time. Often, medical debt can be repaid over a period of three to five years, and a portion of it may be discharged as well. If a judgement lien has been obtained by a medical provider, the court will factor this into deciding whether a Chapter 7 or Chapter 13 bankruptcy is preferable.