At least a little bit of personal debt is just about as American as baseball and apple pie. You might be paying off your home and vehicle monthly, catching up on a hefty credit card bill, or be burdened by the most common type of debt in the United States- medical debt. Most medical care is highly expensive regardless of whether the patient has a health insurance policy. Your out-of-pocket costs for an unexpected medical procedure could be several hundred dollars, if not thousands. If you don’t have the savings to pay up, you could become one of the millions of Americans with unpaid medical debt. Your medical situation could also cause you to miss work and fall behind on other bills. It’s no wonder that bankruptcy is the number one reason that people in the United States file for bankruptcy. However, a recent legal change makes the option that some credit reporting agencies have exercised- to omit medical debt from consumers’ credit reports- a mandatory practice. This will boost credit scores and create access to better financial opportunities for people who struggle with medical debt.
For some, this new rule may be enough to avoid more formal debt relief such as bankruptcy. It was introduced by former Vice President Kamala Harris last year, and comes in addition to medical debts being voluntarily removed from many credit reports. Others need that comprehensive protection and debt elimination to improve their circumstances. Do you have questions about filing medical bankruptcy in Reno that you would like answered by an experienced legal professional? Schedule your free consultation with our Arizona Bankruptcy firm today by calling 602-609-7000.
Timing A Medical Bankruptcy Filing
If you are filing bankruptcy specifically due to medical debt, there are several factors that could impact when would be best for you to file. If they conflict with each other, you could be left weighing the costs and benefits of filing quickly or waiting to file your case. Some of the issues that come up often in medical bankruptcy filings include:
- Finishing care with a specific doctor: Your doctor has the right to stop providing medical care if you discharge your balance owed through bankruptcy. This could be inconsequential with a one-off injury or a common medical condition that many doctors can treat. But if you’re in the middle of treating cancer with a highly specialized doctor, you’ll probably want to hold off on filing until your treatment is complete. You can always receive treatment from an emergency room after filing for bankruptcy.
- Impending collection effort: If your medical condition has caused you to miss payments with several creditors, some of them may make formal efforts to collect much sooner than medical providers will. It might be impossible for you to get by if your creditor starts garnishing your wages or repossesses your vehicle. Filing for bankruptcy protects you from these creditor collection attempts with the automatic stay. Getting a petition in with the court to activate the automatic stay is sometimes more important than waiting until the most opportune moment to file.
- Waiting to purchase a home: You will be ineligible for mortgage loans to purchase a home for two years after filing for bankruptcy. However, if you already own your home when you file, a good amount of your home’s equity could be protected by the homestead exemption. For some families, the best bankruptcy strategy is to wait to file until shortly after purchasing a home.
- Spending a tax refund: Filing for bankruptcy can put your tax refund at risk. One of the most straightforward ways to bypass this disadvantage is by filing for bankruptcy after spending your tax refund on reasonable expenses. Whether this is the up-front costs for a medical procedure you’ve been putting off, repairs on your vehicle, or even your bankruptcy attorney’s retainer, your attorney can’t access your tax refund if it’s gone before you file.
How Bankruptcy Will Impact Your Other Debts
Medical debts are unsecured debts without priority status, so they are the most straightforward type of debt to clear in bankruptcy. In chapter 7 bankruptcy, they are wiped out with no restriction. In chapter 13 bankruptcy, they are the lowest category of debt paid off in the payment plan, only being repaid to the extent that the debtor’s income allows. But if medical bills are only one piece of the puzzle formed by your debt, you may be concerned about how other types of debt will be treated in your bankruptcy filing. Credit cards are one of the other most common types of debt in the United States. They are treated nearly identically to medical bills in bankruptcy, although they can be excluded from discharge if it is found that the debtor exceeded pre-bankruptcy spending limits on luxury purchases.
Some priority debts, like child support and some taxes, won’t be cleared by filing for bankruptcy, but can give you time to get your affairs in order so you can make regular payments after your case is complete. Filing for bankruptcy can pause a priority debt wage garnishment, but confirm with your attorney first if your wages are being garnished for back child support. This may require that you file for chapter 13 rather than chapter 7 bankruptcy.
One of your top concerns about filing for bankruptcy could be what will happen to your secured debts. It may be crucial for you to keep the asset secured to the debt as collateral. The good news is that you can keep the asset and continue paying on your home mortgage or auto loan after you declare bankruptcy. You might even be able to leverage the bankruptcy filing into more favorable terms for your agreement, especially if yours were predatory to begin with. This all relies on your asset being eligible for protection under the applicable bankruptcy exemption. Want to discuss the exemptions that will apply in your case and confirm that your belongings will be safe from creditors and the trustee? Schedule your free consultation with an experienced Phoenix bankruptcy lawyer by calling 602-609-7000.
Explore Your Options With A Dedicated Bankruptcy Professional
When you file for bankruptcy, you have more to lose than just your debt- an inaccurate filing can result in seizures of your assets, future payments, and more. This can be devastating, especially after the amount of time and effort that it takes to prepare a bankruptcy petition. Hiring legal counsel to handle the details of your case reduces the risk of case delays, dismissal, etc. Our Arizona Bankruptcy team makes the process more simpler and more straightforward so you know what to expect along each step of the way. Bankruptcy can help you protect your assets from creditors and clear debts so you can start over with a clean slate. Want to learn more about your options from someone who knows the ins and outs of filing for bankruptcy in Arizona? Our office offers free consultations by phone and payment plan options that allow you to file your case for Zero Dollars Down. Schedule your free consultation today by calling 602-609-7000
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