Medical bills are a major reason for clients to call our office to speak with a bankruptcy lawyer. We often hear, “I have great credit, but a huge medical bill. Should I file for bankruptcy?” The answer depends on your overall situation. For example, are your other debts under control? Will will you have financial struggles if you making payments on your medical debts? You want to consider these things because filing for bankruptcy will have a negative impact on your credit for several years.
Bankruptcy is an effective tool if used wisely. During your consultation, we will discuss your situation and what your options are so you can make a wise and informed decision.
Your Options
A bankruptcy attorney can provide you with several options that go beyond bankruptcy. For example, debt negotiation and settlement is one option. This is extremely effective when it comes to medical debt. At times, the hospital and medical providers are willing to lower the total bill and to accept a payment plan. If a provider receives a letter from a bankruptcy attorney, it indicates to them that you are considering bankruptcy as an option. Providers might be more willing to settle due to this. Once you file for bankruptcy there is no guarantee how much money they will receive if anything at all. From this perspective, negotiating is often their best hope of receiving something at all.
The Process and Negotiations
If they are unwilling to negotiate, another option is to file Chapter 13 bankruptcy. Chapter 13 is a reorganization where you propose a monthly payment plan to the court. All of your unsecured debt, including medical bills, will be reorganized in a Chapter 13. In many cases, Chapter 13 is more ebenficial than other options even though bankruptcy will hurt your credit score.
Making Chapter 13 Payments
With Chapter 13, you can continue to make payments as agreed on your home and vehicles and nothing that you own will need to be sold. If your credit is not in bad shape and your other debts are largely under control, this is your best option because there really is no need for you liquidate anything. Simultaneously, your financial situation will be improved because you will be making one monthly debt payment that is affordable and covers all of your payments.
The last option is filing Chapter 7 and this is not necessarily advisable if your credit is in good condition otherwise. Chapter 7 is a liquidation bankruptcy that wipes out your debts entirely. Your medical bills will be wiped out and so will all of your unsecured debts. If you want to keep your home and vehicles you will need to reaffirm them and continue to make payments as agreed apart from your bankruptcy filing.
To go over these options in greater detail, call our office and schedule a consultation with a California bankruptcy lawyer.
NOTE: This is for informational purposes only and does not constitute legal advice.