Health insurance is expensive in the United States, largely because it is a highly privatized industry being unduly regulated by the federal government, which results in the federal government mandating many types of coverage that many people don’t want and don’t need. Providers of health insurance do their best to create plans that protect their clients’ well-being, but that comes at a great cost for a variety of reasons. If you do not have access to health insurance because the monthly health insurance premiums and the mandatory deductibles are so high, a sudden high medical expense might create severe debt. If you are struggling with medical bills and other debts, Behm Law Group Ltd. can help you navigate the process of filing for Chapter 13 bankruptcy in Worthington, MN.
Much debate has occurred about the percentage of bankruptcy cases caused by medical debt. Finding evidence of whether bankruptcy cases due to medical bills are on the rise is difficult because there are often several factors that lead to a case.
To understand the causes of a Chapter 13 case, it’s important to know exactly how this type of bankruptcy case functions and how it can be applied to certain financial circumstances.
Chapter 13 is a reorganization bankruptcy process. When you file for Chapter 13, you will work with your attorney to create a proposal for your debts to be reorganized into a repayment plan lasting three to five years. If your income is lower than the state median for a similar household, you will have a three-year plan, and if it’s higher than the median income, you’ll have a five-year plan. In your repayment plan, you’ll typically repay secured debts in full (i.e., mortgage or car), your priority debts in full (i.e., most tax debts, criminal fines and any debts technically exempt from bankruptcy), and your unsecured debts in part (i.e., credit card debt and medical bills). The amount you’ll pay of your unsecured debts depends on the amount they would receive from the hypothetical liquidation of your non-exempt assets in the event you had filed for Chapter 7 bankruptcy relief instead.
Put simply, the conditions for a Chapter 13 case to be effective are a steady income on behalf of the filer, debts that will be partially or fully discharged in the case, and the willingness of the filer to make regular payments for the duration of their plan.
Because medical bills are often discharged in full in a Chapter 13 bankruptcy case and because those bills are often so high that they still affect those with steady incomes, the rise in medical debts today may be creating an equal increase in Chapter 13 cases. Some studies show that up to 65% of bankruptcies yearly may be a result of medical debt. While it is difficult to discern an exact, single cause of a bankruptcy case, many reports show that medical debt is among the driving causes.