Many people think that a medical bankruptcy is something that will never happen to them. They reason that they are in good health, have savings, and this should provide a buffer against any unexpected medical expenses. They may even account for the fact that they have medical insurance coverage for themselves and their family members, and therefore conclude that facing unmanageable medical debts is outside the realm of possibility.
Unfortunately, for thousands of families across the country and in Pennsylvania, the overly optimistic assumptions that this view rests on become apparent when a loved one becomes seriously ill or injured. Illness or injury can strike at any time and the loss of income combined with significant medical expenses is often fatal for a family’s finances.
How Many Bankruptcies Are the Result of Illness or Injury?
While many Americans have achieved health care coverage in recent years, having health insurance only decreases the likelihood that you will face a medical bankruptcy. It is not a guarantee against the insurance company disclaiming coverage or otherwise attempting to shift the burden to the patient. In fact, a Nerdwallet study published in 2014 found that one in five Americans struggled to pay medical bills in the previous year. Furthermore, the study concluded that medical debts were the leading cause of bankruptcy in the United States.
In fact, Nerdwallet projected that more than 55 million Americans under age 65 would have issues paying medical bills. The study’s authors estimated that 15 million Americans will exhaust their saving to pay off medical bills and nearly 10 million Americans will be unable to afford basic necessities due to medical expenses. The study also found that many Americans will skip prescribed medication or treatment to save on healthcare costs.
Finally, the study concluded that medical bankruptcies are more common than most would believe. The study found that, in 2013, nearly 2 million Americans lived in households that declared medical bankruptcy. Thus, while medical debt is still a major problem, bankruptcy can mitigate the consequences faced by families.
Can Chapter 7 or Chapter 13 Bankruptcy Eliminate Medical Debts?
After incurring significant medical debts, concerned individuals from Pennsylvania and New Jersey are often curious about whether a Chapter 7 or Chapter 13 bankruptcy filing can eliminate their debt. Generally, it is prudent to negotiate with lenders, however, negotiations should be handled by an experienced lawyer due to the risk of reaffirming debts that are at of the statutory collections period or are otherwise not collectible. However, if negotiation and pre-bankruptcy solutions are ineffective, a bankruptcy filing may provide relief from the medical debt you have incurred.
Whether a Chapter 7 or a Chapter 13 filing is likely to be the most effective means of addressing your debt turns on a number of factors. First, one must consider the types of debts held and whether there are significant secured debts in addition to unsecured medical debts. One must also first consider the property held by the individual, whether Chapter 7 bankruptcy exemptions are sufficient to protect that property and other goals for the bankruptcy. Additionally, a prudent bankruptcy attorney will also consider whether the individual can satisfy the means test and qualify for Chapter 7 bankruptcy.
Individuals with little property and significant unsecured debts – such as medical debts and credit card debts – typically receive more favorable treatment through Chapter 7. Chapter 7 is the most effective means of eliminating unsecured debt and, under favorable circumstances, a filing can often be completed in less than six months. By contrast, individuals with significant property and assets that they wish to protect or significant secured debts may be more likely to accomplish their goals through Chapter 13 bankruptcy. However, the Chapter 13 bankruptcy process will take significantly longer and a payment plan under the Chapter will typically last for three to five years.
Talk to a Philadelphia Bankruptcy Lawyer To Find Out If Medical Bankruptcy Is Right for You
The first step towards getting a fresh financial start following an illness or injury and incurring significant medical debts is to assess your situation with a strategic bankruptcy lawyer. The Philadelphia bankruptcy attorneys of Sadek & Cooper always fully assess your concerns and goals before making a recommendation that is likely to address your debt problems. To schedule a free and confidential legal consultation to discuss if bankruptcy is a good fit for your situation, call Sadek & Cooper at 215-995-2543 or online. We have law offices conveniently located in Philadelphia, in Pennsylvania’s Delaware and Bucks Counties, and in southern New Jersey.