If you don’t believe that you can afford to repay a medical debt in a timely manner, it may be a good idea to consider filing for bankruptcy. As a general rule, it can be discharged in both a Chapter 7 or Chapter 13 proceeding. The facts in your given case will determine which type of protection to seek from a North Carolina judge.
Why you might want to consider filing for Chapter 7 bankruptcy
Under bankruptcy law medical debts can be discharged in full in a liquidation bankruptcy. Furthermore, a Chapter 7 case can be resolved within a matter of weeks or months. This means that you can start rebuilding your credit much sooner than you would be able to by filing for Chapter 13 protection. Although it may be necessary to sell your home in a liquidation bankruptcy, you may be able to retain any positive equity in the property.
It is worth noting that you might have to pass a means test to qualify for Chapter 7 protection. This is generally only true if your income is higher than the state median. A legal professional who understands bankruptcy law may be able to help you determine if this applies in your case.
Why you might want to consider filing for Chapter 13 bankruptcy
Filing for Chapter 13 bankruptcy might be a good decision if you have property that you’d like to keep. Typically, you get to keep a home, car or other assets throughout the repayment period of three or five years. If you owe more than your home or car is worth, it may be possible to convert the negative equity in those assets into unsecured debt. This might allow you to reduce the payments on these loans in addition to obtaining relief from a significant hospital or doctor bill.
Although bankruptcy may have negative consequences for your credit score, it may allow you to avoid paying thousands of dollars in medical debts. Ideally, you’ll put that money in an emergency fund that can be used to cover future medical emergencies.