What is the No. 1 reason people file for bankruptcy?

 Posted on July 28, 2023 in Medical Debt and Bankruptcy

Accumulated and unpaid healthcare expenses create an overwhelming burden on households across the nation each year. As reported by finmasters.com, medical debts incurred by uninsured individuals account for 46% of bankruptcies and represent their No. 1 cause.

Many personal bankruptcies also result from a combination of two or more factors. Treating a medical issue, for example, while also taking the necessary time off without pay to recover often creates a critical state of affairs. Other unexpected expenses or a surge of credit card bills could add to an already perfect storm and hinder a household's ability to get back on track.

How many medical debts could a bankruptcy discharge?

The United States Bankruptcy Code does not specify a limit on how much medical debt the court may discharge. As noted by creditkarma.com, under certain circumstances, bankruptcy petitioners may have all their unpaid healthcare debts discharged through a Chapter 7 filing.

When filing for bankruptcy, individuals or married couples must list their income amounts and outstanding liabilities. Medical bills require disclosing whether they came from hospitals, doctors' offices or collection agencies. If qualified to file for Chapter 7 bankruptcy, the court may discharge the balances on medical debts.

Who may file for a Chapter 13 bankruptcy and how may it help?

Property owners who want to keep their homes could have the option to restructure overwhelming debts into affordable payments through a Chapter 13 bankruptcy. This filing choice may also eliminate certain unpaid medical expenses.

If you need to eliminate or reduce an unbearable debt load, you may wish to consider all of your options. Your current income, property and ability to work could help guide the steps you take.