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Medical debt is leading cause of bankruptcy

Ohio residents who are struggling with medical bills may be wondering whether bankruptcy can help resolve their issues. Experts say that bankruptcy should be a last resort, but that it can be an effective method of dealing with medical debt if there are no other options available. There are different types of bankruptcies, so choosing the right method depends on an individual's specific situation.

The two primary forms of individual bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy discharges debt through the liquidation of assets, while Chapter 13 allows an individual to reorganize debts into a payment plan that may be more feasible. Bankruptcy could affect a person's credit for up to 10 years, depending on the type of bankruptcy they use.

A recent survey by a consumer website reported that medical debt was the number one cause of bankruptcy in 2013. A bankruptcy expert said that in 2008, he started seeing clients in which medical expenses were the dominant driver of their debt issues. There is a misconception that excessive medical debt only happens to those who are uninsured. In fact, 78 percent of those who file for bankruptcy for medical bills have insurance.

While bankruptcy can be one method for eliminating the debt, an individual should explore other options first. In many cases, a hospital will be willing to work out a repayment plan. The sooner an individual addresses the issue, the easier it will be to resolve. If all other options are exhausted, bankruptcy may be the best solution. An experienced bankruptcy attorney could examine an individual's debt and assets and explain the requirements and consequences of different alternatives of debt relief.

Source: FOX Business, "Medical Bankruptcies are Still a Problem, Here's What to Expect", Donna Fuscaldo, February 18, 2014

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