When you suffer a medical injury and your insurance doesn’t cover all or most of the bills, the result can be overwhelming. You can find yourself drowning in medical debt, unsure of how you will dig yourself out again. On top of that, injuries often mean you have to take a work leave to heal which can mean less income or even no pay at all.
You might feel like you’ve hit a dead end when it comes to your finances. However, seeking bankruptcy with the help of a skilled Hawaii bankruptcy attorney can mean a new beginning. Medical bills can typically be discharged or restructured in bankruptcy, depending on which chapter you file for.
So how do you go about filing for bankruptcy to get relief from your medical bills? The following article can give you some direction.
Medical debt is one of the many types of debt that can be discharged in a bankruptcy. Medical debt is typically considered unsecured meaning once your bankruptcy is complete, it will be wiped out. Filing for bankruptcy on your medical bills can have many benefits including:
Collections and lawsuits are halted
While some debt is dischargeable and can be wiped out at the end of your bankruptcy, some is not. The difference is whether the debt is secured or unsecured and your Hawaii bankruptcy lawyer can help you determine what type of debt you have. Unsecured debts are not tied to collateral and include:
Secured debts are ones that will not be discharged at the end of your bankruptcy and will require continued payments until they are complete. Secured, non-dischargeable debt includes:
Your medical debt as well as your assets will be handled differently based on whether you’re filing for Chapter 13 or Chapter 7 bankruptcy. So determining which option is better will depend on your particular financial situation. A Hawaii bankruptcy attorney can help you decide which chapter will be the best for you, but there are a few general things you can keep in mind:
If you’re hoping to have your debts wiped out for a fresh start, you may be looking into liquidation or Chapter 7 bankruptcy. The process is generally quick and will eliminate your medical bills as well as other overwhelming debt under the supervision of the bankruptcy court and your appointed trustee. You must qualify for Chapter 7 by proving your income is below the median income in Hawaii. If you do not qualify, Chapter 13 bankruptcy is still an option.
If you do qualify, your non-exempt assets will be liquidated to pay off as much debt as possible. Most of your essential assets will be exempt such as a primary home, a necessary car, retirement accounts, and more. However, extra vehicles, luxury items, expensive jewelry, and more will be sold.
Upon completion of the process, your medical and other debts will be discharged and your case will be closed. However, your credit score will likely be affected and you can look for programs with your Chapter 7 bankruptcy lawyer to help rebuild your credit.
A Chapter 13 attorney can guide you through the process of filing for Chapter 13 bankruptcy, which is helpful for those who are making too much money to qualify for Chapter 7 bankruptcy, or who do not wish to lose their assets. You can propose a 3-5 year plan based on your income and necessary expenses. The plan will be approved by the bankruptcy court and you will make payments to your assigned trustee who will pay the creditors.
When it comes to your medical bills and other unsecured debts, they will likely be reduced to fit in your repayment plan. Some may even be discharged at the close of your bankruptcy. The benefit of Chapter 13 bankruptcy is that you will be able to be given fresh hope to pay off your debts without having to lose your assets.
When it comes to your credit score, many people are concerned that bankruptcy will destroy it. While bankruptcy can have a significant negative impact, it is entirely possible to recover, especially with the help of a program through your Hawaii bankruptcy lawyer. Bankruptcy can drop high credit scores 100-200+ points, but if your score is already low, you will not see as drastic of an impact.
Your bankruptcy will also show on your credit report for a specific amount of time. It will remain on your credit report for 10 years if you file for Chapter 7 and 7 years if you file for Chapter 13. Although this impact can be serious, with the right program, you could be back on track with a high credit score in just a couple years! The benefit of being out from under your overwhelming medical debt might be well worth the credit score impact.
Before you file for bankruptcy, meet with a bankruptcy lawyer who will go over your case with you. They can look at your financial situation to determine if bankruptcy is the right option or if there are other solutions open to you.
Your lawyer will handle all the legal filings and court requirements so that you can have peace of mind and they will make sure you get as much debt discharged as possible. A bankruptcy lawyer won’t stop there either, after your bankruptcy is complete, they can help you rebuild your credit and provide advice on how to avoid financial pitfalls in the future.
If you file for bankruptcy, do so with a trained bankruptcy lawyer at your side.
If you’re drowning in debt, medical or otherwise, reach out to our Hawaii bankruptcy lawyers at Blake Goodman for a free consultation. With over 80 years of combined experience, we have seen it all and can guide you towards the financial freedom you deserve.
Contact us today to schedule a consultation and let us help you towards a fresh start when it comes to your finances.
Blake Goodman received his law degree from George Washington University in Washington, D.C. in 1989 and has been exclusively practicing bankruptcy-related law in Texas, New Mexico, and Hawaii ever since. In the past, Attorney Goodman also worked as a Certified Public Accountant, receiving his license form the State of Maryland in 1988.
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