I believe in the saying, “Health is Wealth”. You need to always be healthy because if you get sick you not only feel pain in your body but also in your pocket. You are not assured even if you have medical insurance because they only cover up to a certain amount. If you are scared of going into surgery then I think it is scarier after the surgery.  Why am I saying this? The amount of the medical bills incurred could make you sick again. How will you be able to pay the medical debt? The sad truth of the matter is that many people experienced this kind of situation. Most of them are forced to declare bankruptcy due to medical debt or medical bankruptcy.

When Does Medical Bankruptcy Occur?

Medical Bankruptcy happens when an individual files for bankruptcy because of failure to pay debts and bills. In this instance, the individual cannot pay anymore the medical debts that he incurred after a long illness or surgery. If you think that these individuals do not have medical insurance or emergency fund for sickness, then you are wrong. Most of them have medical insurance. The problem is the staggering cost of medical bills and the limitation of the medical insurance is what makes the medical bankruptcy occur.

How Does Bankruptcy Work?

Most would think that bankruptcy happens because a person cannot pay his credit card bills anymore or his business did not do well. Surprisingly, half of the bankruptcies filed are not businessmen or shopaholic women. The statistics show that the majority of people who file for bankruptcy are those who are medically indebted and have no way of paying their medical bills. There is no formal medical bankruptcy. However, in the bankruptcy law, the financial restructuring appropriate for this is the Chapter 7 and Chapter 13 of the Bankruptcy Code.

What are Chapter 7 and Chapter 13 of the Bankruptcy Code?

These are two options of the individual when filing for bankruptcy due to medical debt. The first one is Chapter 7. In this bankruptcy process the individual will be free from debt, including your medical debt. The downside is that is that your credit will be affected because it will be on your credit record for the next 10 years. It will be difficult for you to secure credit because of this. The second option is Chapter 13. In this process you are supervised by the court to construct a repayment plan for your debts. It will also protect you from lawsuits and further asset loss. Chapter 13 remains in your credit report for 7 years.

Illness and sickness are part of a person’s life. Most of us plan by having medical insurance and emergency funds for these kinds of situations. However, the hard economic times that we have and the rising costs of the medical bills will still leave us with a huge amount to pay. It will eat up our savings so it will be easier to consider filing for bankruptcy. Medical bankruptcy can be the only option left for us if we have incurred large amount of medical bills. If you are considering this option there will be available information on cheap bankruptcy attorney that can give you advice on how to go about it.