Is Filing Bankruptcy a Good Solution?
It’s part of the aging process—our bodies start to break down, and we require additional medical care. With changes in employer-provided health insurance and government programs over the last couple decades, it’s no surprise that medical debt is the single biggest financial challenge facing most older Americans.
Because medical debt is unsecured, it can be discharged in a Chapter 7 bankruptcy filing. Is that a good approach? What impact might bankruptcy filing have on your overall financial status?
The first thing to understand is that a Chapter 7 bankruptcy filing, in which you permanently discharge debt in exchange for transferring certain assets to the bankruptcy court, only applies to debts incurred prior to filing. If you’re in reasonably good health, and your medical bills are the result of an accident or non-chronic condition, you may get a real benefit from filing for protection under Chapter 7. However, if your medical condition isn’t likely to improve, you stand to face the same problem in the future as new bills pile up. A bankruptcy filing may provide only temporary relief. Your bankruptcy lawyer can advise you on whether it’s in your best interest to file or if other options might be better for your situation.
Another consideration is the impact a bankruptcy filing will have on your rights to keep property, including your home. In Chapter 7, certain property is exempt from transfer to the bankruptcy court, but there are limits on the dollar amount of the exemption. With respect to your home, there’s a “homestead exemption” that determines how much of the equity in your home can be protected. If you have more equity than the homestead exemption amount, the bankruptcy court may take the property and sell it, giving the excess equity to your creditors. That also may happen if a creditor sues you in civil court for an outstanding debt, but the process is different. An experienced bankruptcy attorney can help you weigh your options and decide which approach is best for you.
You don’t have to worry, though, about how a bankruptcy filing will affect your retirement funds. Most retirement accounts are exempt from bankruptcy proceedings.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide comprehensive counsel to individuals throughout the state of New Jersey who seek to address financial challenges through a bankruptcy petition. Contact our office online or call us at 856-424-6400 to see if you qualify for a free initial consultation (on selected cases). Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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