Medical Expenses Fuel Bankruptcy

In the USA one of the major causes of worry is the medical expense. The recent times have witnessed a large number of people filing medical bankruptcy.

Some of the major causes of medical bankruptcy are as follows.

* Medical expenses are usually totally unexpected. Sickness does not see the financial situation of the diseased. It just compels the patient to avail medication to stay alive and this comes at a high price. It is possible that the sick is already undergoing sever financial crisis.

* Medical care in the USA is very expensive. In most of the cases it is seen that the patient has to first spend the money on the medication and hospitalization. The expenses if found justified and covered by the policy, is reimbursed by the insurance company. Many people subscribe to medical insurance and pay the premium regularly. Despite this it is seen that in most of the cases that the insurance companies get away without paying anything to the sick, thanks to the loopholes in the law. This pushes the person towards medical bills bankruptcy.

* The medical expenses mainly depend on the severity of the disease and the time taken to recover. If the patient takes a longer time to recover, the medical expenses rise exponentially. It is natural that one does not know which disease is will be inflicted upon him/ her.

It is because of the above mentioned reasons that the patient after revival becomes financially sick and pushed towards medical debts bankruptcy. The two most common factors that aggravate the financial matters are as follows.

* Use of credit card to buy the medicines can prove to be very costly affair and push the sick towards filing bankruptcy. This is very common among the senior citizens who survive only on pension.

* Some people turn this unsecured loan into a secured loan by pawning the equity of the house for getting rid of the medical bills. This strategy can lower the rate of interest but at the cost of your residence.

The medical bill debt can be got rid of by applying for personal bankruptcy. This type of bankruptcy includes nearly all the unsecured loans. Seeking the benefits of bankruptcy approval is not very easy. Usually one has to seek the help of bankruptcy attorney for assuring the successful approval of the bankruptcy application. The most common and popular tool for getting a discharge from medical bills debt is filing Chapter 7 bankruptcy.

Bankruptcy Basics

According to the American Bankruptcy Institute “household debt is at a record high relative to disposable income.” The Administrative Office of the U.S. Courts reported that the number of filings for the year ended March 31, 2003 “exceeded 1.6 million for the first time in any 12 month period,” a 15.1 percent increase from the previous year.

There are two basic types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 Bankruptcy and Chapter 13 are legal proceedings that are available to a person to cope with a financial crisis. Personal bankruptcy must be filed in a federal bankruptcy court. You will have to pay about $160.00 in court fees. Attorney fees are additional.

Chapter 7 bankruptcy involves the liquidation of all your assets that are not exempt from the bankruptcy settlement. Exempt property may include automobiles, some household furnishings, and property needed for work-related use; for example if you were a mechanic the tools you use to perform your work would be exempt from the bankruptcy settlement. Exemption amounts vary from state to state.

Under this plan the court appoints a trustee to handle the liquidation of your non-exempt property. The trustee can sell or turn over your property to your creditors. The court discharges your debts and you are now debt-free. You are allowed by law to file a Chapter 7 bankruptcy once every six years.

A Chapter 13 bankruptcy allows you to keep property, like a mortgaged house (provided there are no liens on it) or a car, as long as you have a steady income. A Chapter 13 bankruptcy is a court-ordered and approved repayment plan to your creditors. This plan allows you to use your future income to pay back your debts over a 3-to-5 year period without surrendering any property. Once you complete payments under the plan, your debts are discharged by the court.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both provide exemptions that allow people to keep certain assets, although exemption amounts vary. A bankruptcy will not erase most child support, alimony, fines, taxes and some types of student loans.

Financial experts agree that a bankruptcy should always be the last resort used for managing your debts. Bankruptcy has long lasting results. A bankruptcy remains on your credit report for a period of 10 years, making it more difficult to obtain credit in the future. You should also know that although your bankruptcy disappears from your credit report after 10 years, you may still be asked by future employers or lenders if you have “ever” filed for bankruptcy.

Disclaimer: The information contained in this article is for informational purposes only. The author is not herein engaged in rendering legal, insolvency, tax, or other professional advice and services.