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Medical debt leads amongst causes of personal bankruptcy

There is a hope that new health care reforms will reduce the amount of strain medical debt places on Americans - including here in Tennessee -- and similar state health care reform programs seem to be showing some promise. According to a Nerdwallet Health study from 2013, medical debt is the leading cause of personal bankruptcies in the U.S., exceeding credit card debt and mortgage debt as causes of personal bankruptcy.

One expert noted that in about 2007 or 2008, medical debt went from being a primary component of personal bankruptcies to a dominant factor causing personal bankruptcies. A study from 2008 found that 72 million Americans between the ages of 19 and 64, which represent 41 percent of Americans, reported having difficulty paying for medical care.

The weight of unmanageable debt can be overwhelming. The stress of an unexpected medical condition, operations, hospital bills and doctor and therapy bills can pile up. Simply being ill can be a stressful experience but the addition of medical expenses and medical debt can be crushing. Because of this, options for debt relief exist. There are two primary options for filing for bankruptcy to help eliminate debt. The first type of personal bankruptcy is Chapter 7 bankruptcy. A Chapter 7 bankruptcy filing allows a party to liquidate non-exempt asset to repay debts and enjoy debt elimination.

Because Chapter 7 bankruptcy requires that the filing party meet, or fall below, the median income in the state where that party resides, another type of personal bankruptcy also exists. Chapter 13 bankruptcy allows a filing party with a reliable source of income to reorganize debt into manageable payments that can be repaid according to a repayment plan. Once the repayment plan is complete, the filing party can enjoy a fresh financial start from medical debt and other types of debt.

Because there are rules and requirements to file for personal consumer bankruptcy, it is best to understand the different options available. A trained bankruptcy attorney can listen to a party considering bankruptcy and help the party determine the best option for that party's circumstances, needs and goals.

Source: The Huffington Post, "New Fed Study Says Health Reform Can Reduce Financial Stress, Bankruptcies," Wendell Potter, Feb. 24, 2014

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