Medical debt is a burden that many individuals and families in Wisconsin face. When your medical bills pile up, it can be overwhelming, and you may wonder if bankruptcy can provide relief from this financial strain.
Bankruptcy is a legal process that helps individuals and businesses manage overwhelming debt. In the United States, there are two primary types of bankruptcy available to individuals: Chapter 7 and Chapter 13. Qualifying for Chapter 7 or Chapter 13 depends on various factors, including your income, expenses and the type of debt you have. Meeting the specific requirements set by the bankruptcy code is necessary to successfully eliminate medical debt.
Chapter 7 bankruptcy
Chapter 7 bankruptcy helps discharge unsecured debts, such as medical bills. When you file for Chapter 7, a trustee may sell some of your non-exempt assets to repay your creditors. However, medical debt is typically seen as an unsecured debt. Thus, it can often undergo a complete discharge.
Chapter 13 bankruptcy
In a Chapter 13 bankruptcy, you create a three-to-five-year repayment plan to pay off your debts, including medical bills, in part or in full. This form of bankruptcy allows you to retain your assets while gradually reducing your debt.
According to Forbes, a 2019 study of almost 1,000 Americans who filed for bankruptcy revealed that two-thirds of them filed because of medical debt. While bankruptcy can be a viable option for eliminating medical debt, you may want to consider alternatives, like negotiation and settlement with medical providers, before moving forward with your bankruptcy filing.