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Can bankruptcy discharge medical debt?
Medical emergencies are extremely hard to prepare for. When an injury or illness can appear instantly, victims have very little time to build a savings to pay for the debt. When tens of thousands of dollars of medical debt become a significant obstacle for someone, what can they do to recover?
Health care is extremely expensive. Every year, the United States spends 3.5 trillion dollars on medical expenses. Staying in a hospital can cost more than $5000 per day. Medical debt can keep a family from getting ahead on other debt and deny the chance to improve their lives, but bankruptcy may be the answer to beating it.
What bankruptcy can do
Personal bankruptcy comes in two primary forms: Chapter 7 and Chapter 13 bankruptcy. While both options discharge unsecured debt like medical debt or credit card debt, each of these options impacts medical debt differently. Chapter 13 bankruptcy allows an applicant to restructure the debt payments into a payment plan lasting between three and five years. After this period, the court will discharge any remaining debt.
Qualifying for a mortgage after a Chapter 7 bankruptcy
Seeking Chapter 7 bankruptcy protection can help you get out from under your mounting debts and finally re-establish yourself on a firm financial footing. Yet at the same time, such an action does have an impact on your credit rating, which may make it difficult for you to secure financing for large purchases (such as a mortgage) in the days and months immediately following your bankruptcy.
Many come to us here at The Law Office of Donald L. Bell asking how long after filing for a Chapter 7 bankruptcy might they be able to qualify for a mortgage. If you share the same question, you should know that there likely is not an easy answer to this question.
How long to wait to apply for a mortgage
Officially, there is no mandatory waiting period after filing for bankruptcy for you to apply (and qualify) for a mortgage. Simply based on approval rates, however, a general pattern emerges for the different home loan programs available to you. Per Lending Tree, these are:
Explore these options before considering bankruptcy
Many people with financial problems may consider filing for bankruptcy. This legal process provides individuals relief from their debt and a second chance at financial success. Though bankruptcy might be the only choice for many people in Maryland, other options might provide better solutions.
Before filing for bankruptcy, many states require that people try credit counseling and financial evaluation. Credit counselors are very resourceful and may find a solution that benefits creditors and debtors alike.
Credit counselors examine finances for opportunity
Credit counselors can help those with financial problems find solutions. By reviewing one's entire financial situation, including income, debt, savings, spending habits, and more, a counselor can professionally assess one's situation and recommend a course of action. Counselors will try many tactics before recommending filing for bankruptcy.
Financial counselors may recommend the following:
Is filing Chapter 7 bankruptcy the right choice for you?
Many Americans find themselves in extreme debt with no recourse to pay. The United States Courts report that there were over 750,000 non-business bankruptcy filings in 2019, with over 773,000 cases in total.
If you find yourself in serious debt, you may have considered Chapter 7 bankruptcy as a way to discharge the amount. However, other options may exist and understanding which might best suit you can help you gain better control of your finances.
The ability to file
There are certain conditions for filing Chapter 7 bankruptcy. For example, your total debt must exceed your income. If you are unemployed and have no current income, it is likely you qualify to file. You may have to provide proof of hardship and an inability to pay before you are allowed to file.
Chapter 7 vs. chapter 13
Choosing a bankruptcy type that best suits your situation can have a serious impact on your financial future. Chapter 7 erases or discharges your debt completely, while chapter 13 reorganizes what you owe and provides you with a repayment plan you can manage according to your income. With Chapter 13, you may have to surrender property to help repay your debts, such as vehicles and real estate.
What kind of debt can bankruptcy discharge?
When someone is experiencing considerable financial debt, bankruptcy may be the best option for them to recover from debt. While bankruptcy may be the right choice for many, it does not eliminate or manage all debt. There are two forms of debt: secured and unsecured.
Bankruptcy only eliminates unsecured debt, meaning someone who files for bankruptcy will not be ultimately debt free after their discharge of debt. Even though bankruptcy does not discharge all debt, it is still a viable option for many people. In 2019, more than 750,000 people filed for bankruptcy. SO what kind of debt can bankruptcy eliminate?
Secured debt
Unsecured debt does not have any collateral, or security, attached to it. Without bankruptcy, if a borrower could not pay the debt, the lender would need to file a lawsuit to collect their losses. Popular examples of unsecured debt are:
Auto accidents and unmanageable debt
After a motor vehicle wreck, victims often face many challenges. Serious injuries, emotional trauma and losing the ability to work are often very hard. Moreover, all of these difficulties often give rise to other problems in one's life, especially from a financial point of view. Many people take on high levels of debt in the wake of a car crash, and it is imperative for people to understand their options when it comes to addressing this debt.
For some, payment plans and paying close attention to one's finances help eliminate debt. However, filing for bankruptcy is necessary, in some instances.
Medical costs, bills, lost wages and other problems
There are multiple reasons why the impact of auto accidents is often very devastating in terms of finances. Many victims struggle with medical expenses due to a crash, and some take on high levels of debt that they cannot afford to repay. Others fall behind on their bills, especially if they have to take time off work or cannot work any longer because of an accident. Furthermore, many people use their credit cards to get by, resulting in excessive interest charges that destroy their financial well-being further. When someone takes on debt that they cannot deal with, it is imperative to address the situation swiftly.
Does Chapter 7 stop debt collector calls?
Filing for bankruptcy is not an easy choice to make. Thousands of Americans struggle with overwhelming credit card debt, medical expenses and mortgages. However, for some in Maryland and in many other states across the U.S., claiming bankruptcy is a way to start fresh with a clean financial slate.
If you have been involved with late credit card payments, mortgage payments or had your medical expenses sent to a collections agency, you know first-hand how difficult it can be to keep up with creditor calls. It may seem as if those collectors will never stop calling. Yet, there are ways to stop the harassment.
What is an automatic stay?
Once you file for Chapter 7 bankruptcy, an automatic stay is put in place, according to the United States Courts. The stay bans any creditors or collection agencies from contacting you regarding your debt. These agencies cannot call you or correspond with you via email or mail. Furthermore, they are unable to continue pursuing lawsuits or garnishing wages.
Repairing credit after bankruptcy
For many individuals who find themselves in overwhelming debt due to unexpected medical bills or unpaid tax debts, bankruptcy offers a fresh start and a way to begin recovering financial stability. While filing for bankruptcy may lower an individual's credit score temporarily, there are several ways to increase the score after going through bankruptcy.
Bankruptcy and credit reports
Both chapter 7 and chapter 13 bankruptcy may offer benefits to individuals who are having trouble paying their bills. People who have a steady income may qualify for chapter 13, which may stop foreclosure proceedings and allow the filer to pay off secured debts within three years.
According to the U.S. Courts, once an individual completes all payments under the chapter 13 plan, he or she receives a discharge. This legal ruling releases the individual for any debts covered by the bankruptcy plan. Within a few years after the discharge, the chapter 13 information may drop off the individual's credit report, allowing him or her to improve the score.
What are signs of debt collection abuse?
Unexpected medical bills, job loss and economic uncertainty are just a few of the things that may cause you to feel overwhelmed by debt. If you are unable to pay some bills for a while, those balances may go to a debt collection service. Unfortunately, many collectors use unfair and/or abusive tactics.
The Federal Trade Commission provides information on the laws relating to fair debt collection. Recognizing abusive and deceptive practices may help you avoid financial issues.
Requirements for debt collectors
According to the FTC, debt collectors may contact you through the phone, email, text messages or letters. However, laws prevent them from making phone calls to your home early in the morning or late at night. When a debt collector contacts you, he or she must provide you with a written notice that includes specific details: the name of the creditor, the amount you owe and the steps you should take if the debt is not yours.
Does chapter 13 bankruptcy save your home from foreclosure?
Considering Bankruptcy
A volatile economy makes it challenging to keep paying your bills on time when something unexpected happens. Even a relatively simple medical issue may lead to high doctor's bills and a temporary loss of income. It may only take a few months for your debt to spiral out of control, leaving you with delinquent mortgage payments and the threat of foreclosure.
If you are facing foreclosure but want to keep your home, filing for bankruptcy may give you the opportunity to recover from overwhelming debt without losing your home.
Chapter 13 bankruptcy requirements
According to the U.S. Courts, chapter 13 bankruptcy may allow you to avoid foreclosure on your home. This type of bankruptcy, a wage earner's plan, requires you to have a regular source of income to meet the eligibility requirements. If you do have a steady income, you may work with the court to develop a repayment plan that generally lasts for three years. During this time, you make reasonable payments to a trustee who distributes the money to your creditors according to the terms of the bankruptcy plan.
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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
