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How does medical debt affect bankruptcy filings?

Medical debt is a major factor in consumer bankruptcies, with 43 million residents of the United States struggling with unpaid medical bills that negatively affect their credit ratings, the Consumer Financial Protection Bureau reports.

Some industry insiders believe that medical debt is the driving force behind as much as 26 percent of consumer bankruptcies.

What comprises medical debts?

Doctor bills, lab charges, hospital expenses, drug costs and rehabilitative therapy charges all combine to add up to a whopping sum that few consumers can ever pay off. Then add in interest and fees on unpaid accounts and credit card interest rates.

By one account, in 2013, the average medical debt for consumers in America was $9,374, with 61 percent of those in debt having some due to unpaid medical expenses.

Getting rid of medical debt through bankruptcy

Consumers struggling to pay down mountains of medical bills often turn to bankruptcy to wipe out those bills and give them a fresh start. This makes sense especially when those unpaid hospital and doctor bills make up the bulk of the consumer's unsecured debt. Also, if their medical bills are more than 50 percent of their income, filing for bankruptcy is the best option.

The first question consumers need to answer is just how much they owe health care providers and other creditors. This paints a realistic picture for them to see what options will be viable. In most — but not all — cases, the debtor seeks relief by filing under Chapter 7.

If there are assets they seek to preserve despite filing for bankruptcy, consumers may choose to file under Chapter 13, which is a debt reorganization.

To determine which choice makes the most sense for your circumstances, retain a New Hampshire bankruptcy law attorney to offer advice and counsel.

Source: Medical Xpress, "Why medical debt – and bankruptcy – are growing problems," Daniel A. Austin, accessed Aug. 18, 2017

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