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Medical debt and bankruptcy: looking at the connection, P.2

Last time, we began looking at recent information gleaned from a poll conducted in Florida regarding the connection between medical debt, financial difficulties and bankruptcy. As we noted, even those with health insurance are not protected from financial hardship caused by medical debt and we know that bankruptcy is among the most common forms of debt cited in bankruptcy filings.

Fortunately, medical debt is a type of debt that can be discharged in bankruptcy, so filing for bankruptcy protection certainly can offer relief. Those who are carrying need to consider their overall financial situation, though. Financial difficulties never happen in a vacuum, and most people who have significant medical debt also carry other significant debts. It must be determined, first of all, whether bankruptcy is the right option for their circumstances. Second, it needs to be determined which type of bankruptcy filing is right for the debtor.

Under a Chapter 13 filing, a debtor establishes a court-supervised repayment plan which allows him or her to catch up with debts, whereas a Chapter 7 filing involves liquidating certain assets to pay off creditors. In either form of bankruptcy, medical debt may be discharged, but a debtor needs to work with the form of bankruptcy that suits their needs and goals.

A bankruptcy filing does remain on a debtor's record for 7 or 10 years, but it is important for debtors who have had medical debt discharged in bankruptcy to ensure their credit report reflects the discharge. In some cases, there are mistakes and a debtor may carry around the black mark of medical debt, despite the fact that it has been cleared away in bankruptcy. Navigating this and other issues related to bankruptcy can be confusing, and it important to work with an experienced attorney to ensure one receives clear guidance and strong advocacy.

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