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Limits of medical bill relief with bankruptcy

Bankruptcy is an option available to people in South Carolina when they are financially overwhelmed by bills and debts. Medical bills are a common reason people fall behind financially. Bankruptcy can provide relief, but careful consideration of the details is necessary before using this legal tool.

Unpaid medical bills are quickly gaining on credit card and mortgage debt as a primary motivation for personal bankruptcies. Even people with health insurance cannot always keep up with medical bills because of co-pays, treatments that are not covered or the inability to go to work. Bankruptcy can erase medical-related debts, but only pre-existing bills. A person in ill health who expects to continue to need medical treatment will not have bankruptcy relief from future medical bills. Therefore, the timing of a bankruptcy matters.

The type of bankruptcy a person chooses also influences how assets are dealt with. The two primary forms available to consumers are Chapter 7 and Chapter 13.. During a Chapter 7 bankruptcy, the trustee will sell off a debtor's non-exempt assets and use the proceeds to repay creditors. Retirement accounts and a primary residence are examples of exempt assets, though state laws vary concerning the exemption of someone's home from the liquidation process. The Chapter 13 option may give debtors the ability to protect certain assets, but a payment plan to creditors will be required.

Because many details affect the results of a personal bankruptcy, people might wish to turn to an attorney for advice. An attorney can explain how a bankruptcy will affect a person's assets. The choice of when and how to proceed with bankruptcy might also become clearer after an attorney informs a person about the pros and cons of various legal options for debt relief.

Source: GO Banking Rates, "5 Signs It's Time to File for Bankruptcy," Morgan Quinn, Feb. 18, 2015

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The Huggins Law Firm, PA

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