You can make cuts in your budget to reduce unnecessary expenses, but your health is an entirely different matter. Your medical care must be a priority for your well-being so you do not opt out when essential treatment is necessary. Of course, the high costs of health care in the US are no secret. A minor illness or simple medical procedure could soon become thousands of dollars, and health insurance does not always cover all expenses, even if you have it. You could soon receive collection letters and phone calls, possibly even threats of legal action for medical debt. For many people, adding unexpected medical bills in Arizona to other monthly expenses puts them in a serious financial predicament.
If you cannot pay in full for existing bills, you may never get control over debt. Instead of continuing down the debt spiral, you can address your medical costs. Bankruptcy can help with medical bills in Arizona, along with other debt that is weighing you down.
Bankruptcy is a complicated process, starting from the initial decision about filing Chapter 7 or Chapter 13. While you should always retain an Arizona bankruptcy lawyer for assistance, you can read on for some additional details about medical bills in Arizona.
Classifying Medical Bills in Debt
Initially, you should realize how medical bills are treated in bankruptcy and what they mean for debt. When you receive medical care, you receive an invoice for the treatment provided. You are expected to pay according to the terms listed, usually 30 days out. Under the circumstances, your medical bills are unsecured debt. Secured debts involve collateral, such as a mortgage, where your home is the security.
Some healthcare practices will allow you to go a few months without paying, and many will not charge any late fees or interest. However, providers will not extend indefinitely because they want to get paid for their services. You will eventually face calls to pay, followed by various types of legal action, if you do not satisfy the debt. Fortunately, medical bills are unsecured debts that can be discharged in both types of bankruptcy, though the proceedings for Chapter 7 and Chapter 13 are very different.
Chapter 7 Bankruptcy Summary
Under the US Bankruptcy Code rules, Chapter 7 enables you to discharge qualifying debt and wipe it from your record. Because medical bills are unsecured debt, they are almost always eligible for discharge. Another important point about Chapter 7 is that you hand control over your assets to the bankruptcy trustee. The trustee’s goal is to satisfy as much of your debt as possible, which means your assets could be liquidated to get the cash to pay creditors.
Chapter 7 is a valuable benefit for your financial future, but discharging debt represents a loss for creditors. Therefore, the rules aim to ensure that you only qualify if truly necessary to resolve your debt burden.
- You may be eligible if your earnings are lower than the state median income level.
- If your income is above this threshold, you may still qualify under the Means Test. This assessment determines whether you can pay the debt after subtracting monthly bills from your salary.
How Chapter 13 Bankruptcy Process Works
The end result of Chapter 13 is also the elimination of unsecured debt, including your medical bills in Arizona. You will not pay what you can to creditors through a sale of your assets by the bankruptcy trustee because liquidation is not allowed. Instead, you will work out a debt repayment plan to satisfy debt over a period of 3 to 5 years. The eligibility rules are greatly relaxed, so the only requirement to qualify is having a job or other source of income. Creditors will want to know that you can stay current with the debt repayment plan.
With Chapter 13, all medical bills in Arizona and debts are restructured into a monthly payment amount that you can afford. This restructuring usually results in you paying less than the underlying balance. You cannot discharge secured debts because they are supported by collateral, but you can work mortgage debt into your debt into your repayment plan. The mortgage will remain, but you wipe out arrearages, interest, and other fees.
Steps in the Bankruptcy Process
Though Chapter 7 and Chapter 13 are different proceedings, there are many similarities regarding the basic process. You can expect to go through the following steps:
- File the bankruptcy petition, along with all required schedules.
- Submit your debt repayment plan for Chapter 13, which must be done with your petition or within 14 days thereafter.
- Work out exemptions to protect property from liquidation in Chapter 7.
- Attend the creditors’ meeting that is required for both types of bankruptcy.
- Your case concludes with the bankruptcy court entering an order discharging qualifying debt.
The creditors’ meeting is not a trial, but it is a formal session in which your creditors will be present to ask questions. For Chapter 7, they want to confirm information on your bankruptcy petition about eligibility, assets, and debts. In a Chapter 13 case, creditors also want assurance that you can complete the debt repayment plan.
Myths About Bankruptcy in Arizona
There is a lot of misinformation about both Chapter 7 and Chapter 13, and the internet can be your best friend or worst enemy when trying to find facts. To clarify how the process works, it is helpful to debunk some myths that stand in the way of you being debt-free.
- One of the most valuable benefits of both types of bankruptcy is the automatic stay, which stops creditors from engaging in any effort to collect your debt. They cannot call, file a lawsuit, garnish your wages, or foreclose on your home.
The myth is that the automatic stay is iron-clad and permanent for your case. This is not true with your mortgage if you are behind on payments and have accrued arrearages. The lender can request that the bankruptcy court lift the automatic stay, allowing it to proceed with foreclosure.
- Another myth is that you can eliminate all types of debt in bankruptcy. You already know that secured debts are not discharged, but there are others that cannot be wiped out. Examples include alimony, child support, and certain types of taxes. If there is a judgment against you after a personal injury lawsuit for a DUI accident, you will not be able to discharge it.
- It is simply not true that there are only drawbacks to going through Chapter 7 or Chapter 13, particularly with respect to your credit score. You gain plenty of benefits by being debt-free and able to support your family and lifestyle. You are not paying interest and late fees on accounts without ever making a dent in the balance due. The vicious cycle of paying what you can afford and going nowhere is terminated.
Bankruptcy and the Impacts on Credit
You cannot make informed decisions about Chapter 7 or Chapter 13 without a full understanding of how the process affects your credit and what you can do about it. When the discharge is complete, the information is reported to the credit bureaus that keep a database of your history. With a Chapter 7 case, the matter will remain on your credit report for ten years. For Chapter 13, the report will show bankruptcy for 7 years. In addition, with both types of bankruptcy, your credit score will drop significantly.
The effects on credit may seem grim but think about your life if you do not file for bankruptcy.
- Your credit score may already be extremely low if you are behind on bills. It will only drop further as you continue to carry the debt and try to get ahead without filing bankruptcy. On the other hand, by the debt discharge, your credit score could rise because these past-due accounts weighed it down.
- The lender for your mortgage can take legal action to get paid on its secured debt at any time, eventually leading to the foreclosure of your home. It is sold, and you will be evicted. You buy some time through the automatic stay in bankruptcy.
- It could take decades to pay off your full debt when you must cover all balances due, interest, late fees, and arrearages. You could even be on the hook for your creditors’ legal fees. After bankruptcy, your credit is restored within 7 to 10 years.
Legal Help with Chapter 7 and Chapter 13
Medical bills are just one aspect of a bankruptcy case, and many other details are equally important. Your Arizona bankruptcy lawyer will handle all necessary tasks for the steps in Chapter 7 and Chapter 13, but a more critical role is acting as your legal guide. Decision-making is everything, starting with which type to file. With knowledgeable counsel’s advice, you can feel confident about the process and your financial future.
Discuss Options with an Arizona Bankruptcy Attorney
It is a relief to know that bankruptcy can help with medical bills in Arizona, as well as with debt that is a huge financial burden on your life. You can see how retaining legal counsel gives you an edge with the process, so please get in touch with DebtBusters to learn how we can assist. You can reach our offices in Scottsdale, AZ, at (866) 223-4395 or by visiting us online. We can set up a no-cost consultation with a bankruptcy lawyer who will review your circumstances and get started on your new, clean slate.
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