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When a medical emergency affects your financial health

One of the most unfortunate consequences of a medical emergency is the onslaught of exorbitant bills that can follow. Medical debt is one of the most common types of debt, and it can have a negative impact on a person's overall financial health. If your medical bills have wiped out your savings, and you find yourself facing calls from California debt collectors, you have options.

Why should you consider Chapter 7 bankruptcy?

If you are unable to pay your medical bills and do not expect to have the ability to pay them in the future, you may benefit from Chapter 7 bankruptcy. While people often perceive bankruptcy negatively; in reality, it is an organized, manageable way that a person can deal with his or her debt.

Upon filing for bankruptcy, calls, letters and threats from debt collectors will stop. The process will eliminate unsecured debt, which includes medical bills and the following:

  • Credit card debt
  • Payday loans
  • Store credit bills
  • Past-due utility bills

Additionally, you may be able to keep certain important assets that could be ruled as exempt from liquidation, such as your home.

Understanding eligibility requirements

Not everyone with debt is eligible for bankruptcy. Before you can move forward, you must first complete a means test. The means test will consider your monthly income and compare it to the median income for a typical household of similar size. If your income is below the median level, you may qualify. If not, you may be eligible for Chapter 13 bankruptcy. However, certain deductions are applied before the means test calculates your income and determines if you are eligible, including the cost of child care, housing, transportation and other necessary expenses.

In addition to the means test, an experienced attorney can explain the other steps that are required in order to complete a Chapter 7 bankruptcy.

What happens when the bankruptcy process is complete?

Upon completion of the bankruptcy process, you may take steps to rebuild your credit. The elimination of unsecured debt provides you with the financial capability to deal with other debts that may not be eligible for discharge in bankruptcy, such as student loans.

An extended illness, the birth of a child, an accident, surgery or other medical emergency can derail your financial life and leave you drowning in debt, but you have the right to act upon the legal options available to you and secure the fresh financial start you deserve.

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