How To Deal With Medical Debts

Many Americans do not appreciate that is not credit card, or mortgage debt, that is the biggest factor in people filing for bankruptcy. Medical debts are the biggest single cause of the American public seeking the protection of the bankruptcy courts.
It is always wiser if possible to avoid filing for bankruptcy; your best option is to always avoid medical debts of possible. Of course, unfortunately nobody ever knows what lies around the corner, when it comes to personal health

There are a few tips that can assist in avoiding serious medical debt situations, take a moment to read through the information below to see if it can assist you.

The best option always as to avoid medical debts as far as possible, by staying as healthy as possible. Excessive drinking and smoking as well as a general unhealthily lifestyle can lead to multiple serious complications. Improving your general attitude towards your health can pay massive bonuses not only in personal well-being but also in terms of possibly saving huge amounts of money in long-term medical payments.

Any kind of health regime can be a huge benefit in the long-term especially as we get older. An investment now in personal health can pay off massively by avoiding medical debts in the future. Unfortunately, for many Americans this opportunity has already passed them by, and those people need to seriously consider their options.

One mistake that many people make is to transfer their medical debts onto high interest loans such as credit cards. Generally speaking, the rates of interest charged by medical services will be well below than that charged by a credit card company. Therefore, a credit card or similar arrangement is not a practical way of settling medical debts.

Another reason not to transfer your medical debts onto a credit card is that it will greatly reduce the possibilities of you receiving Medicaid. The reason for this is that Medicaid is largely based on your gross income. As such, only medical debts lower your average gross income, increasing the possibility of receiving assistance. If you transfer the bills onto your credit cards, they will not be counted in the same way.

If you have difficulty making the proposed hospital or other medical payments attempt to negotiate a payment plan that will suit your budget better. There are consultants who are experienced in negotiating on your behalf, with medical companies. They can negotiate lower payments and possibly a reduced total amount owed.

You should however keep in mind that these companies are not charities they work for a profit.

If you do negotiate a payment schedule, it is important that you stick to those arrangements. Late or missing payments will incur fess and also interest charges, as well as damaging your credit history.

There are many organizations and charities who offer free assistance to people who are having problems with their medical bills. These organizations such as churches and other community groups are often in a position to at least give free advice and possibly offer financial aid.

You can also consider applying for Medicaid, which is funded by Federal and State departments. Although all States offer Medicaid programmes, the details vary from one State to another, so it is important that you contact your own individual State department.

Your final option and in many cases the most viable, is to consider taking out a debt consolidation loan or an equity release loan. These types of financing offer a low interest with many years to pay and can provide a low monthly payment. Which may be your cheapest option for paying off your medical debts.

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Chapter 7 Bankruptcy Overview

A successfully filed Chapter 7 Bankruptcy completely discharges, or wipes out, most unsecured debts, including but not limited to credit cards, medical bills, utility bills, payday loans, and any other debts that do not have collateral or a hard asset attached to them. Chapter 7 bankruptcies are the most common type of bankruptcy and are commonly referred to as a “Fresh Start” Bankruptcy.

The filing of a Chapter 7 bankruptcy will also stop garnishments and civil lawsuit proceedings and, in most cases, discharge the debts underlying these proceedings. The length of a Chapter 7 Bankruptcy case is generally 3-4 months from filing the bankruptcy petition to the final discharge of debts. In order to find out if you qualify for a Chapter 7, it is important to talk with an experienced Washington bankruptcy lawyer.

Characteristics of Chapter 7 include:

1. Permanent Discharge of Unsecured Debts

In general, all nearly all unsecured debts are eligible for discharge in a Washington State Chapter 7 bankruptcy. These are debts that have no assets attached to them. For example, the following are all typically discharged in Washington Chapter 7 bankruptcy: credit cards, unpaid medical bills, repossession deficiencies, signature loans, payday/cash advance loans, most collection matters, and nearly all lawsuits.

2. Permanent Discharge of Secured Debts if the Secured Property is Surrendered

If you choose to surrender property that is carrying a debt balance, these debts are typically permanently discharged as well. For example, the secured loan on a car is wiped out (discharged) if you allow the car is repossessed or simply forfeit it and where you owe more than the car is worth (a repossession deficiency). If not already repossessed, the property can be surrendered before or after you file for bankruptcy.

3. Automatic Stay

After you sign off on your Washington State Chapter 7 Petition, our offices will electronically file it in United States Bankruptcy Court. Immediately upon filing, the court enters an order protecting you from all creditor action. In so doing, the Bankruptcy Court orders all creditors to stop all harassing phone calls, lawsuits, threats, judgments, repossessions, and garnishments. This protection Order is known as the “Automatic Stay”.

4. Keep Exempt Property

Most people are able to keep all of their property in a bankruptcy. If you have furniture and household goods of average value and are willing to keep up your car payment(s), you will most likely keep all of your personal property. Retirement accounts (401(k), IRA, etc) are also exempt property that you will be allowed to keep following a final discharge of your unsecured debts in a bankruptcy proceeding.

5. Keep your House

In a Chapter 7 bankruptcy, you may continue to pay your mortgage or your car loan and keep the house or car by signing a “Reaffirmation Agreement” or, in most cases, by simply remaining current on your secured debts and continuing to make the regular payments. In effect, a reaffirmation agreement takes the place of your original agreement and essentially makes it as though you have not filed a bankruptcy on those particular loans. In many instances, however, we do not recommend filing a reaffirmation agreement. We simply recommend that you keep making your monthly payment.

Usually homeowners who file for bankruptcy do so because they do not have enough equity to refinance their home to pay of their unsecured debts. In the State of Washington for example, so long as you do not have more than $125,000 of equity after typical closing costs from a sale, you are virtually assured of keeping your home so long as you continue to make your mortgage payments (and secured lines of credit, if any).

While filing for bankruptcy will not lower your regular monthly mortgage payment, a Washington State Chapter 13 Bankruptcy (not Chapter 7) will allow you to catch up on your payments over as long as a five-year period. In order to qualify for a Chapter 13 bankruptcy, however, you must make payments toward the amount you are behind in your mortgage AND be able to make your regular mortgage payment.

If you can now afford to make your mortgage payments, but still wish to sell your home, filing a Chapter 13 bankruptcy will cancel the scheduled foreclosure sale and give you time to list your property for sale. This will allow you to gain more profits and to net additional proceeds from your home than you would typically earn at a foreclosure sale.

6. Keep Your Car

So long as you continue to make your car payments, you can typically keep your vehicle(s). Most people who have car payments do not have enough or any equity in their vehicle for the cars to be considered non-exempt. In fact, in the majority of cases, people owe more than their car is worth. Only in cases where you have a car that is worth considerably more than the amount owing on it, or a car of significant value where you have no loan on it at all, would you not be allowed to keep your vehicle in a bankruptcy proceeding.

Chapter 7 also gives you an option to “Redeem Your Vehicle”. This process involves you paying the secured creditor the fair market value of the collateral, which is typically far lower than the amount you still owe on your current car loan. In exchange for redeeming your vehicle, the creditor provides you with the release of their lien. There are several redemption finance companies we can refer you to that will provide you with a loan will have new and lower payments based upon your vehicle’s current and fair market value.

Property you cannot keep in Chapter 7 Bankruptcy

When filing for a Washington State bankruptcy, some types of property are typically non-exempt and can be used to pay at least a portion of the claims of creditors. Examples of non-exempt property include: cash and bonds (not part of a retirement account), investments over a certain amount, a second car (for single, non-married debtors), a second home, family heirlooms over a certain value, valuable collections such as paintings, coins, or stamps, and expensive trade or business equipment.

The state median income level

Under the new bankruptcy laws that took effect October 17, 2005, if your income is above your state’s median income, you may not qualify for Washington State Chapter 7 protection. The median income varies from state-to-state and each state therefore has their own list of the state median income thresholds for individuals and married couples with or without dependent children. For a detailed list of Washington income threshold’s, please contact our offices at 206-624-3644.

Non-Dischargeable Unsecured Debts

Certain unsecured debts are not dischargeable in a Chapter 7 Bankruptcy and must continue to be repaid in full. These include unpaid taxes, government- backed student loans, and unpaid child support. In many cases, however, your monthly payments of these debts can be restructured and lowered by filing a Washington Chapter 13 Bankruptcy.

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Is Bankruptcy The Only Answer?

When you’ve lost your job or are staring at high medical bills you can’t pay, you may start thinking about a way to end it. For many people, bankruptcy is the only way out. However, it may not be the only answer for you.

Depending on the size of your debt, the amount of your assets and the size of the family, you may not need to file for bankruptcy. Even if you do, all of these things will help determine what type of bankruptcy is best for you. Chapter 7 may look the most appealing but you may gain more by filing for Chapter 13.

Many debtors are willing to work with debtors who approach them and try to work things out. They may offer you a period of time where you don’t need to pay, so you can get everything under control. However, most creditors are not as willing to help you without giving you a load of stress.

Sometimes the reality that you need to file for bankruptcy is something you must accept. There is nothing you can do about it. However, if you do want to think about filing, you will benefit most by seeking out a good bankruptcy attorney to help you with the process.

When debt pile up and monthly charges demand more than income, it may be time to consider filing a bankruptcy case before your financial life really gets out of hand. While a person’s self-esteem may suffer from filing for court protection under the laws of bankruptcy, there are also circumstances that may force the decision.

Most people live their lives within their means and practice the use of credit responsibly. Occasionally, some life changing experience will alter their intentions to make good on promises to repay their debts such as a job loss or medical problems and before they know it the bills have piled up. Attempting to keep up with the bills can be admirable but when the time comes that it is no longer possible looking into filing a bankruptcy case may alleviate a lot of undue stress.

There may still remain a certain stigma among people that if they file for bankruptcy they are admitting to being a failure at controlling their spending. What many fail to recognize is that sometimes situations beyond their control may place them in a financial dilemma. If it is a problem that continues after filing a bankruptcy case, they will want to take steps to help them treat their credit more responsibly.

One thing to remember is that once a bankruptcy case has been filed it becomes part of the public record. While there are few people who actually look through these records for information, the basics of the case will be available for review.

Although by and large filing for bankruptcy no longer has the social stigma attached to it as perhaps it did in times gone by, there is a curious phenomenon some debtors have found: when filing for bankruptcy, company is plentiful but not always desirable. Under the heading of misery loves company,” there are those filers who will band together and sympathetically swap stories about how they were made to take this drastic step.

Sometimes this kind of company may be found in well-meaning support group settings while other times it may be a number of friends that come to cheer up the debtor. Do not misunderstand: bankruptcy is an often traumatic event and having friends to be supportive goes a long way to helping you keep your sanity and sense of self worth intact, but there are times when those who are too well meaning with in effect hinder you from moving on.

This of course refers to those who will rob you of the ability to take responsibility for your actions and see the mistakes you made for what they really are: mistakes that must not be repeated. Failure to heed the lessons learned from such a bankruptcy will lead to a repeat or at least to a failure to heal the damaged credit and might once again find you in dire financial straits. Surround yourself with those who will reaffirm your sense of well-being and self esteem, but who will also offer help with working out a budget, sticking to the budget, and will not tempt you with offers of retail therapy” to make you feel better about yourself.

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