Being seriously sick or injured can be bad enough on its own, but the costs associated with medical issues may linger longer than your ailments. Overwhelming price tags may have you asking how you’re going to manage, but bankruptcy may hold the answer to your questions.
66.5% of bankruptcies filed in the US are due to medical causes. The sometimes-insurmountable costs of medical care or time spent away from work can all add to growing concerns. When you can’t manage the bills on your own, filing for Chapter 13 bankruptcy could be a viable option for paring down your debt.
Getting in too deep happens, especially with lofty healthcare costs. The amount you owe can balloon out of control for any number of reasons:
- When your insurance doesn’t offer ample coverage
- When you don’t have health insurance at all
- You weren’t able to collect enough savings to cover unforeseen perils
Types of debt
There are generally two classifications of debt in bankruptcy, and they are secured and unsecured debt. Secured debts usually hold a link to an asset, like when you get a loan for a house or car. Chapter 13 bankruptcy doesn’t typically forgive these types of debt. Instead, you might need to form a payment plan that spans the next few years.
Unsecured debts, in contrast, don’t connect directly to an asset. This can include things like credit card balances, outstanding personal loans and medical debt. Since there is no property tied to unsecured debt, there is nothing physical for a lender to reclaim. This increases the likelihood that your debt is forgivable upon declaring Chapter 13 bankruptcy.
Priority debts may live on after bankruptcy, like taxes, criminal fines and spousal support, and are usually the first you will pay after your declaration. You could handle non-priority debts, which could include medical bills, with whatever money remains, with the possibility of discharging the remainder.
Knowing where you can find relief in Chapter 13 can be a crucial first step in deciding where to go when medical costs become too much. Make sure your debts aren’t causing you pain long after your ailments are gone.