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Bankruptcy and Medical Debt

Chapter 7 petition for bankruptcy

Chapter 7 of the many states’ bankruptcy laws deal with the discharge of unsecured debt, such as debt from credit cards and personal loans, as a bankruptcy lawyer Arlington TX relies on can explain.  Secured debts are normally unchanged, requiring that the collateral securing the debt remains in the debtor’s possession if appropriate payments are made.  This petition is always available to corporations and individuals with primarily business debt.  Otherwise, individuals cannot file a Chapter 7 petition unless they meet certain income requirements. Often the chapter 7 of many states’ bankruptcy law is referred to as liquidation which is where the trustee collects all your possessions and sells any assets which are not exempt. Certain debts although cannot be discharged in this petition of bankruptcy alimony, child support, fraudulent debts, certain taxes, student loans, and certain items charged. In most cases, the debtor has a large credit card debt and other unsecured bills with very few assets.

As evident in most of the cases filed under this petition, the chapter 7 bankruptcy can eliminate these debts. Certain secured debts such as car, furniture or house may be kept through the process of reaffirming. To complete this process, one must sign a voluntary “Reaffirmation Agreement”. If a person decides that they want to keep their house, car or furniture, and they reaffirm the debt, they then cannot bankrupt or wipe out that debt again for eight years. They will although still owe that debt and must continue to pay it just as they were obligated to continue to pay it before they filed for bankruptcy. Reaffirmation agreements can be set aside during the earlier of 60 days after the agreement is filed with the Court, or upon the Court’s issuance of an Order of Discharge.

Medical debt

Medical debt is one of the most common reasons people file for bankruptcy. Medical debt can be more emotionally stressful than other types of debt because it almost never accumulates by choice. Medical debt is most often a product of an unanticipated illness or accident. It can add up quickly and unexpectedly, while intensifying the health problems that caused it.  Medical debt is an especially prominent occurrence in the United States, which cause a lot of stress for people. Considering nonetheless the number of patients with insurance coverage, including coverage under the Patient Protection and Affordable Care Act of 2010, a substantial amount of medical bills remains the patient’s responsibility.

As mentioned earlier when discussing about the chapter 7 petition for filing for bankruptcy, a persons’ debts are separated into different categories. Certain debts receive special priority treatment and can’t be eliminated through bankruptcy. Fortunately, medical debt is not one of them. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills don’t receive priority treatment and can easily be wiped out by filing for bankruptcy.


Thanks to our friends and contributors from Brandy Austin Law Firm PLLC for their insight into bankruptcy and medical debt.

 

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