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Unfortunate reality: health insurance won’t necessarily prevent medical bankruptcy, P.3

We’ve been looking in recent posts at the issue of medical debt, and about addressing this debt in bankruptcy. As we noted last time, determining which form of bankruptcy is best for a medical debtor requires an examination of a variety of factors.

Debtors who have significant ongoing medical expenses have a reduced amount of disposable income available in bankruptcy, and this can be a factor in favor of filing for Chapter 7 bankruptcy, as can having other significant debts and expenses in addition to medical debt. The more disposable income one has, the less likely it is that a debtor will be able to qualify for Chapter 7 bankruptcy. 

Also, the higher the overall debt, including medical debt, the more of a challenge it will be for a debtor to successfully complete a Chapter 13 plan. In Chapter 7, the overall amount of debt one carries isn’t as significant since the approach is more based on liquidation of property rather than paying debts back by repayment.

Another important factor to consider in determining whether Chapter 7 or Chapter 13 is right for a medical debtor is the debtor’s ability to earn money. If a medical condition has left a debtor permanently unable to bring in adequate earnings, it is going to be less of a possibility that a Chapter 13 repayment plan is going to fit their situation.

Determining which form of bankruptcy best fits one’s situation is not always easy or straightforward, but an experienced attorney can help a debtor to look at all the relevant factors to consider, as well the filing requirements, and to determine how to best proceed in addressing their debt.

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