People in California naturally think about their health when confronted with a cancer diagnosis, but a medical crisis could also trigger financial problems. Ongoing medical bills sometimes coupled with an inability to work could quickly deplete a person’s resources. A 2013 study prepared by the Fred Hutchinson Cancer Research Center reported that people with cancer faced a 2.5 greater chance of filing for bankruptcy compared to people without serious medical problems.
Either Chapter 7 or Chapter 13 bankruptcy could help a person recover financially from high medical debts. Under Chapter 7, a debtor might need to sell some assets to repay debts, but after a certain point, a court will discharge remaining balances. A Chapter 13 bankruptcy will protect some assets but requires a payment plan of three to five years before any remaining balances might be discharged. Both approaches exempt the liquidation of certain assets, like retirement accounts.
Too often, people struggling with a disease and medical debt tap into retirement savings when a bankruptcy action could have protected those funds. A person confronted with financial woes because of a medical crisis might benefit from a timely investigation of legal debt relief options. Some individuals delay bankruptcy because they expect to incur more medical debt. A Chapter 13 filing, however, still keeps the door open to future relief. A bankruptcy case might be changed to a Chapter 7 discharge of new debts, or a refiling of a Chapter 13 case could roll new medical debts into the payment plan.
A case evaluation by an attorney familiar with bankruptcy law may allow someone to chart a way forward. An attorney might propose strategies for preventing wage garnishment or property repossession and manage communications with creditors. Legal support may include preparing the paperwork for the bankruptcy court.