An accident or illness can leave a resident of California with significant medical debt. If you are concerned about not being able to pay your health care bills, bankruptcy may be an option.
Medical debt and bankruptcy
Medical debt is fully dischargeable in bankruptcy. This means that the court can eliminate the unpaid balance of your medical debt as part of a Chapter 7 or Chapter 13 proceeding.
Benefits and drawbacks of bankruptcy
If you have high medical bills and cannot pay these bills within a reasonable amount of time, bankruptcy is an option. Many people try to avoid bankruptcy because of concerns that it will affect their credit and because they prefer to avoid a legal process. While these concerns are valid, there are other things that should be considered:
- Impact on credit scores: Many people refuse to consider bankruptcy because they are concerned about the impact on their credit scores. Although bankruptcy can significantly lower your credit score and will remain on your credit reports for 7 to 10 years, its impact on your credit lessens significantly over time. Many people find they can get credit cards and even a mortgage within a few years of filing for bankruptcy.
- Halting collection activity: Bankruptcy provides you with an automatic stay against your creditors. This means that your creditors cannot contact you about your debt nor start collection activities such as wage garnishment.
- Protecting assets: You do not always have to give up your home, car or other assets in bankruptcy. Some of your assets are exempt from liquidation in Chapter 7 bankruptcy, and a Chapter 13 repayment plan doesn’t require the liquidation of any assets.
- Stress and health: Financial struggles can take a toll on your mental and physical health. If you are trying to recover from an illness or injury, or are caring for someone who is, recovery should be your main focus. Bankruptcy can provide relief from dealing with creditors and a strained household budget.
Bankruptcy remains an option for anyone with unmanageable debt. If your efforts to negotiate with your medical provider have failed, bankruptcy is one way to reestablish your financial health.