Medical bills are a leading cause of bankruptcy filings. Some studies indicate that medical expenses are the primary cause of 62% of all bankruptcies. Regardless of the statistics, though, the fact remains that many people in Texas, even those with health insurance, are facing unmanageable medical debt.
There are several possible ways to deal with unaffordable medical bills, including:
- Negotiating with your providers – it’s possible that the hospital or doctor’s office might offer to reduce the total amount due if you provide a lump sum payment or set up a payment plan.
- A personal loan – this could come from a financial institution or a relative/friend. Regardless of the source, though, you could use the money to pay off past-due bills before they have a chance to impact your credit. Most medical debt only appears on your credit report after 180 days, which gives you some leeway.
- Credit counseling – certified consultants can provide budgeting tools that may help you get a handle on your debt.
- Debt consolidation – there are numerous companies that offer debt consolidation services. These businesses work with creditors to set up payment plans that you’ll pay over a set amount of time.
- Bankruptcy – both a Chapter 7 and Chapter 13 filings provide immediate relief in the form of an automatic stay that prevents creditors from continuing collection actions.
A Chapter 7 bankruptcy filing is one option for medical debt relief. It offers a quick resolution where bills are concerned. Not only do you get the benefit of the aforementioned automatic stay, you also see debt discharged in a matter of months. There are some downsides to Chapter 7, primarily that you risk having to liquidate some assets to pay creditors. State and federal laws offer myriad exemptions that protect your property, though. A Chapter 7 bankruptcy will stay on your credit report for 10 years.
Another possibility for debt relief is a Chapter 13 bankruptcy. Chapter 13 differs from Chapter 7 in several key ways. Namely, Chapter 13 is known as a “repayment bankruptcy.” In lieu of offering discharge right away, debts are combined into one monthly payment that you’ll pay for a set amount of time, usually between three and five years. Debt remaining at the end of the repayment period is discharged. Chapter 13 will also have an impact on your credit and will stay on credit reports for seven years.
Making a decision
Each person’s situation is unique, so there isn’t a one-size-fits-all approach to eliminating medical debt. It’s important to carefully consider all your options before moving forward. You might want to think about consulting a bankruptcy attorney before making the decision about which approach is best.