Even for those with excellent health insurance, mounting medical bills can put a serious strain on finances. During this time especially, with the threat of COVID-19, many U.S. citizens fear a serious medical bill might cause a loss of financial stability. In fact, a recent survey showed that about half of Americans felt a serious medical cost would force them to file for bankruptcy relief.
Because of the coronavirus pandemic, this belief has increased by around 5% since 2019. While the threat of poor health and financial downturn is a scary possibility to keep at the forefront of your day-to-day, it’s important to remember that if you do have to file a bankruptcy case, those medical debts and many others will be quickly resolved. With the guidance and support of a Behm Law Group, Ltd. attorney, you can file a successful case for Chapter 7 bankruptcy in Owatonna, MN and receive long-term, effective debt relief.
Chapter 7 bankruptcy is a liquidation bankruptcy process. Essentially, this means your non-exempt assets will be sold (liquidated) and that non-exempt value will be paid to your creditors. The liquidation/sale of non-exempt assets is the exception rather than the rule of how things usually transpire in a chapter 7 bankruptcy case, however. Typically, all that people lose in a chapter 7 bankruptcy case are their unwanted debts. Because the bankruptcy system is in place to help debtors who cannot repay their debts reorganize and rehabilitate their financial affairs, you will have the opportunity to assert bankruptcy exemptions that protect your property from the liquidation process. This typically includes protecting your house with the homestead exemption and protecting your car with a vehicle exemption. This means filers aren’t left completely destitute while fairness to creditors is still taken into account.
There are three main types of debt broken down in a Chapter 7 bankruptcy case:
- Priority debt, including child support, alimony, some tax debts, and others, all of which will be generally excepted from discharge in any bankruptcy process.
- Secured debt, such as a mortgage or car loan, you’ll pay in full if you want to retain the property securing (serving as collateral for) the debt. If you don’t want to retain the property, you’ll have that debt fully discharged.
- Unsecured debt, including medical bills and credit card debt, is discharged in a Chapter 7 bankruptcy case. If you’re struggling from severe medical debt from a COVID-19 case or any other treatment cost, a Chapter 7 bankruptcy might be the most effective debt relief option for you.
If the majority of your debts are unsecured and you know you can protect your home or other important property with exemptions, Chapter 7 will likely be a very effective way of obtaining long-term financial reorganization and rehabilitation.