Many bankruptcy cases are the result of numerous different factors that are all working together. For instance, someone may already have been struggling to make ends meet due to their student loans. It may technically be their credit card debt that they can’t pay off, but this doesn’t mean it’s the only factor.
In this light, the most common reason for bankruptcy that people cite is medical debt. Once again, it may not be the only factor in the case. But medical debt contributes to the majority of the cases that are filed every year, making it a major driver of American bankruptcy.
How can bankruptcy help?
With Chapter 7 bankruptcy, the assistance you get is because the debt itself is eliminated. For instance, someone may be able to liquidate their non-exempt assets and pay off a portion of their medical debt. The remaining debt is then waived, and this person gets a fresh financial start. This can feel very freeing because they never wanted to take out that medical debt in the first place, but they had to because they had an emergency and American healthcare is prohibitively expensive.
With Chapter 13 bankruptcy, the benefit comes from the fact that a repayment plan is created. Bankruptcy can then help to reorganize debt or combine different forms of debt. This financial obligation is then taken care of with monthly payments toward that repayment plan, and the full debt is eliminated after 3 to 5 years.
If you are interested in using bankruptcy, you need to know what legal steps to take. It’s important to identify the option that will help most in your specific situation.