In bankruptcy cases, all debt falls into one of three categories in California: secured debt, unsecured debt and priority debt. Secured debt is backed by property, such as car loans. Priority debt, which gets special treatment, includes paying child support or taxes. Unsecured debt can include things like personal loans and credit card debt as well as student loans. This is the category that medical debt falls into.
When do you need to file for bankruptcy for medical bills?
Answering this question requires an honest and objective look at your finances and situation. Here are a few of the factors you need to consider: the amount of total debt that you owe, how much medical debt you owe, the amount of income you earn and any exceptions for your personal situation.
Scheduling for a credit counseling session can help you to determine if filing for bankruptcy is the best option for you. Just as there are several categories that debt can fall into, there are different options when it comes to filing for bankruptcy.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is the most common type. In some instances, filing a Chapter 7 bankruptcy requires that the filer give up unprotected property for a clean slate. However, many people keep all of their belongings by using exceptions. This type of bankruptcy is only available if you don’t make a lot of money, and it comes with no repayment plan. Chapter 7 usually wipes out most debt within a few months.
Chapter 13 bankruptcy
Unlike Chapter 7, Chapter 13 does make use of a repayment plan. Chapter 13 is most often used as a means of catching up with property loans and mortgages. With Chapter 13, the filer agrees to make payments based on their monthly income. After the payment plan is finished, a judge clears away any remaining debt.
The best bankruptcy plan for you to file for will depend on your own personal circumstances. To learn more about types of debt and filing for bankruptcy, contact a bankruptcy attorney.