In a recent report, it was found that overwhelming medical expenses often lead to personal bankruptcy. According to the American Journal of Medicine, medical bills are a major factor in over 60 percent of Chapter 7 and 13 bankruptcies. Many find themselves unable to afford health care insurance, and, when they can, policies don’t offer robust coverage.
For those facing financial challenges, Chapter 13 reorganization bankruptcy may be an option to provide debt relief. In comparison to Chapter 7 liquidation bankruptcy, which requires the liquidation or sale of all non-exempt property to pay creditors, Chapter 13 bankruptcy allows those looking to reduce debt to restructure their payments. With reliable income and the help of manageable payments, these individuals are often able to repay their debt in three to five years, and enjoy a fresh financial start.
To qualify for Chapter 13 bankruptcy, an individual must have regular income, and must not have more than $336,900 in unsecured debts. The first step in the bankruptcy process is to receive credit counseling.
Following filing, some debts will be required to be paid in full. These are called “priority debts.” These can include unpaid taxes and child support payments. Payments on secured debts (a house or a car) are also usually included in the plan. Lastly, following payments on secured debts, at least a good faith effort to pay unsecured debts must be shown.
In some cases, if the repayment plan presents a burden, there may be other options. If a person loses their job while working through repayment, the trustee may be able to modify the repayment plan. If the payments are an undue hardship, the bankruptcy court may also be able to discharge them.
At the conclusion of the process, if the repayment plan has been adhered to, and the debtor has remained current on non-dischargeable debts, the debtor will be required to undergo budget counseling and the remaining debts can be discharged.
Source: Albany Tribune, “Inequality And Poverty America Style: In Richness And In Health,” Graham Peebles, Dec. 6, 2012
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Medical expenses account for many Chapter 13 bankruptcies