One of the most common reasons for filing bankruptcy is to get rid of medical debt. A major illness or injury can result in significant bills, even if you have medical insurance. It can also lead to lost time at work, which means less money coming in to pay those bills.
Some or all medical debt can be discharged by filing bankruptcy. Consumers generally have two bankruptcy options: Chapter 7 and Chapter 13. The two types of bankruptcy work differently and the option that works for one person may not for another.
Chapter 7 bankruptcy is the simplest and quickest form of bankruptcy protection. Chapter 7 bankruptcy provides 100 percent discharge of many types of unsecured debt, including medical bills, credit card debt, and payday loans. It usually takes from three to six months to obtain a discharge of debt under a Chapter 7 bankruptcy.
However, not everyone is eligible to file Chapter 7 bankruptcy. If your earnings are too high or you have filed Chapter 7 bankruptcy within the past eight years, you are not eligible. Even if you are eligible, you would not want to file Chapter 7 bankruptcy if you have assets that would not be protected by Florida or federal bankruptcy exemptions. Examples of unprotected assets are collectible cars, vacation property, and boats. Unprotected assets can be sold by the bankruptcy trustee and the proceeds used to pay to your creditors.
If Chapter 7 bankruptcy will not work for you, Chapter 13 bankruptcy may provide a solution. Chapter 13 bankruptcy allows you to put unsecured debt such as hospital bills in a payment plan, which you can pay off over three to five years. In a Chapter 13 payment plan, you pay only what the bankruptcy court determines you can afford, which may be a small percentage of what you owe. Any debt remaining at the end of your payment plan can be discharged.
At Marrero, Chamizo, Marcer Law LP in Coral Gables, our lawyers are here to help you evaluate your bankruptcy options if you have medical or other debt problems. We offer a free initial consultation to answer your questions.