Should I File for Bankruptcy After a Medical Emergency?
Money should be the last thing on your mind when addressing a medical issue within your family. But even with top-tier health insurance, a serious medical problem could cost thousands of dollars. It can also come with additional costs like lost income from missing work for medical appointments and credit cards (and their associated fees) to compensate for that reduction in income. There is no question that medical costs are out of control in our country, leaving families who experience medical emergencies with few options in how to address debt. If you have burdensome medical debt, bankruptcy might be able to help your financial situation. Our experienced Arizona bankruptcy lawyers can file your case strategically so it can be as effective as possible. We also offer payment plans starting at Zero Dollars Down to make the process more affordable. To schedule your free phone consultation, call 602-609-7000.
You Won’t Be Alone Filing a Medical Bankruptcy
It may be comforting to know that if medical bills drive you to bankruptcy, you won’t be the only one to have this experience. Although probably not a fact to be celebrated, medical debt is the leading cause of bankruptcy filings in the United States. It is followed by causes like unaffordable housing costs, divorce, student debt, and helping friends and family members. Like some of these causes, medical problems come with other issues that can affect a person’s financial situation, like missing work, reduced long-term earning potential, and debt accumulated while making ends meet during recovery time.
Arizona law acknowledges that medical debt is a societal issue and should be addressed more sensitively than other types of debt. Prop 209 was approved by vote in 2022. This measure reduces the amount of interest that a person can be charged for medical debts to three percent. It also increased the exemptions for several types of assets, allowing medical debtors to protect more of their assets after an expensive medical problem. For example, it increased the homestead exemption from $250,000 to $400,000 and the bank account exemption from $300 to $5,000. If you need more information about protecting assets in bankruptcy or have any other questions about filing for medical bankruptcy in Arizona, call 602-609-7000.
Hospital Debt Forgiveness
Many people don’t realize that hospitals offer debt forgiveness for patients who meet certain income restrictions. For example, we will use the Mayo Clinic financial assistance policy. There are four steps someone must complete to forgive some or all of their medical bills at this hospital:
Complete the application for all available assistance and signed authorization;
Complete the financial assistance application and all required documents;
Meet the household income guidelines: 60% reduction for patients with an income of up to 400% of the Federal Poverty Guidelines, 100% reduction for patients with an income equal to or less than 200% of the Federal Poverty Guidelines;
Demonstrate an inability to pay for medical services.
Forgiving hospital debt can take a lot off of someone’s plate if they are struggling with medical bills. However, a medical patient can have bills from a variety of sources and from the tangential effects of dealing with a medical condition. Clearing debt from one hospital may only put a small dent in the patient’s total balance owed. Here, a medical debtor may require more comprehensive debt relief, such as bankruptcy. If you’re considering bankruptcy and want input from an experienced professional, call our firm for your free consultation at 602-609-7000.
How Chapter 7 and Chapter 13 Affect Medical Debts
Medical debt is unsecured, meaning there is no asset attached as collateral that the creditor can seize if the debtor stops paying their bills. The good news for medical debtors is that unsecured debt is the easiest type of debt to discharge in bankruptcy. Chapter 7 bankruptcy’s main function is to discharge unsecured debt. Medical bills, along with credit cards, personal loans, repossession deficiencies, and other types of bills will be cleared in a Chapter 7 bankruptcy filing. The process can be completed in a matter of a few months, and the debtor will be protected from creditors by the automatic stay in the interim. Chapter 13 bankruptcy operates a bit differently. It arranges debt into a payment plan that lasts 3 or 5 years. Certain debts must be paid in full in a Chapter 13 payment plan. Unsecured debts, including medical bills, are only paid to the extent of the debtor’s financial ability. Even if they aren’t paid in full, they will be cleared at the end of the payment plan. For more information about which chapter of bankruptcy you should use to discharge medical bills, call 602-609-7000 for your free consultation with one of our Arizona bankruptcy lawyers.
Negative Aspects of Bankruptcy and Rebuilding Credit History
We as a society are conditioned to pay our debts and only declare bankruptcy as a last resort. This isn’t just pressure put on us by big companies- there are drawbacks and long-term financial implications that accompany a bankruptcy filing. Filing for bankruptcy will remain on your credit report for seven (Chapter 13 bankruptcy) or ten (Chapter 7 bankruptcy) years. It can be used as a factor against your approval on many types of financial applications. This includes an application for a home mortgage- bankruptcy debtors won’t qualify for home loans until at least 2 years have passed after bankruptcy. A bankruptcy debtor will also lose all of their credit cards and need to open new lines of credit after discharge.
The side effects of filing for bankruptcy aren’t all negative. It can sometimes be as simple as spinning a situation with a more positive outlook. Bankruptcy can wipe away debts and allow the debtor to start over in many aspects. The debtor should take advantage of every possible chance to rebuild credit. As mentioned above, the debtor will need to open up new credit cards after bankruptcy, which can increase the debtor’s revolving credit balance and improve credit. Financing a new vehicle post-bankruptcy can help build credit as keeping the same auto loan will no longer deliver positive credit reporting. The debtor can enroll in credit reporting for a variety of goods and services if they are confident in their ability to stay current on the payment plan. A post-bankruptcy payment plan can help a debtor afford to file for bankruptcy and build credit as well. To learn more about filing for bankruptcy for zero dollars down, call 602-609-7000.
Let Our Skilled Phoenix Bankruptcy Team Assist You with Medical Debts
Whether medical debt is the root of your financial problems or just a symptom, bankruptcy can be an effective form of debt relief. It can also help you avoid repossession and save assets, stop garnishments protect your paycheck, and more. It creates a chance to create a new credit history without the burden of previous medical debts. This can free up space in your family’s budget for essentials and other comforts that can be taken away by medical costs. If you’re looking to relieve the pressures of medical debt in Maricopa County, Arizona Zero Down Bankruptcy Lawyers can assist you through the bankruptcy process. Our firm offers affordable payment plan options that start as low as zero dollars down. To learn more with your free consultation, contact us through our online form or call 602-609-7000.