Medical Bankruptcy: Fact or Fiction?


You've probably heard someone use the term "medical bankruptcy". It is a word commonly used by people who are going through a medically related financial crisis or who know someone who is facing serious medical debt. While medical bankruptcy is not a legal term, it is a useful term to describe financial recourse for someone who may have reached their end of the line due to medical debt.

Medical bankruptcy can be a misleading term as there is no legal remedy available exclusively for medical debt. In general, bankruptcy is the dissolution or reorganization of all or part of an individual's debt. When you file for any type of bankruptcy, you must include all of your debts. This would apply to home mortgages, auto loans, credit cards, and medical debt. There are several types of bankruptcies, but most people who file for medical debt bankruptcy usually file for Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 bankruptcy can allow an individual to eliminate their debt, while that a Chapter 13 bankruptcy can allow an individual to reorganize their debt into a 3 to 5 year plan, while reducing their debt principle.

The idea that medical bankruptcy exists as a legal remedy may have developed because the court treats medical debt differently than other types of debt. . Not all debts will receive the same treatment in court. A bankruptcy court will generally divide an individual's debt into two categories: secured debt or unsecured debt. Secured debt is the type of debt that is typically tied to assets like a car loan or home loan. Unsecured debt is usually not tied to assets, but can often be eliminated or significantly reduced by bankruptcy. It is important to understand that medical debt is generally classified as unsecured debt.

While the term "medical bankruptcy" is not a legal term, it is a helpful way for an individual to describe how their finances have fallen into chaos. A experienced bankruptcy lawyer will immediately understand what a client needs when inquiring about medical bankruptcy. A bankruptcy lawyer can then educate them on how bankruptcy might be a solution to their financial difficulties caused by medical debt, and even help the individual decide if a Chapter 7 or a Chapter 13 is the most. appropriate to his situation. Once an individual has decided on the best course of action, the lawyer will then lead them smoothly through the legal process of filing for and obtaining bankruptcy.


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