By: chris skinner September 26, 2024

Is Bankruptcy the Best Option to Deal With Major Medical Debt in Los Angeles?

Start By Determining Your Financial Position (Assets and Debts)

When faced with major medical debt in Los Angeles, bankruptcy may be the best option. Still, before filing, it is crucial to carefully assess your overall financial situation. You should start by gathering a complete and detailed list of your assets and debts. Doing so will give you a clearer picture of your financial health and help determine if bankruptcy is indeed the best route for you. Gather all of the following information:

Assets: Cash in bank accounts, real estate properties, vehicles, stocks, bonds, and other investments, retirement accounts, and high value personal items.

Debts: Start with all of your medical bills. You should also gather credit card bills, personal loans, mortgage documentation, vehicle loans, and any other outstanding debts.

Once you have this information, you should analyze it to understand how much of your debt is tied to medical expenses versus other obligations. An experienced Los Angeles bankruptcy lawyer can help. If medical debt is a substantial portion of your overall debt, bankruptcy may be the best path forward to relieve financial pressure. However, if your assets are sufficient to cover your debts, another form of debt relief may actually be better suited for your circumstances.

Consider All Alternative Options for Resolving Medical Debt

What are the bankruptcy alternatives for resolving medical debt? There are several different options available in Los Angeles. You may be able to use any of the following alternatives:

Payment Plan: Many hospitals and other types of health providers offer payment plans. The right plan lets a person pay off your debt over time (without incurring additional interest.) It could even involve a reduction in principal. By negotiating a manageable payment plan, you can avoid the immediate financial strain of a large upfront payment. It is an approach that keeps your accounts in good standing—and can protect your credit score. However, you should always review the terms carefully to ensure there are no hidden fees
Debt Settlement: Debt settlement involves negotiating directly with creditors to pay off a lump sum that is less than the total owed on your debt. It is an option that can be particularly useful for those with a large amount of medical debt. Notably, medical providers will agree to accept reduced payments under certain circumstances. Indeed, medical debt is the one of the most negotiable types of financial obligations.

Know the Cannot File for Bankruptcy Specifically for Medical Debt (All Assets/Debts)

Medical bills are the most common reason why personal bankruptcy is filed in the United States. With that being said, there is no such thing as medical debt-only bankruptcy. When you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy in Los Angeles or elsewhere in Southern California, all of your assets and liabilities will be included. In other words, a bankruptcy court will take a comprehensive approach to your financial situation. When you seek relief from overwhelming medical bills, you must also consider the impact on all of your property and debts.

Understanding Chapter 7 Bankruptcy and Chapter 13 Bankruptcy

Personal bankruptcy filings are split into two broad categories: Chapter 7 bankruptcy and Chapter 13 bankruptcy. The right option for you will depend on a number of different case-driven factors, including how much medical debt you have, your income, and your assets. Here is an overview of the key things to know about the differences:

Chapter 7 Bankruptcy: Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy. It involves selling off non-exempt assets—if the petition has any—to pay creditors. It is suitable for those with limited income who cannot afford to pay back their debts. Chapter 7 can eliminate most unsecured debts—including medical bills. However, it is not open to everyone. You must have an income below the median in the State of California when adjusted for the size of your household.

Chapter 13 Bankruptcy: Unlike Chapter 7, Chapter 13 bankruptcy allows debtors to keep their assets while reorganizing their debt under a court-approved repayment plan. The plan lasts between three to five years—depending on your income level relative to the median in California. Chapter 13 is ideal for individuals with a regular income who can handle a structured payment plan and wish to avoid foreclosure on their home or repossession of other assets. It is less common than Chapter 7 for medical debt, but may be the best option.

How Our Los Angeles Bankruptcy Lawyer Can Help With Medical Debt

Medical debt can put a serious financial strain on a person and their family. As a leading bankruptcy lawyer, Le’Roy Roberson has clients in Los Angeles find their way towards a brighter financial future. We have extensive experience handling both Chapter 7 bankruptcy and Chapter 13 bankruptcy. No matter the specific situation that you find yourself in, our Los Angeles bankruptcy lawyer has the skills, knowledge, and experience that you can depend on.

Contact Our Los Angeles Personal Bankruptcy Attorney Today

At Resolve Law Firm, APC, our Los Angeles bankruptcy attorney is an experienced advocate for clients. We are focused on defending your rights and your interests. If you have any questions about medical debt and bankruptcy protection, we are more than ready to help. Contact us today for a free 30 minute initial consultation. Our law firm provides bankruptcy representation in Los Angeles, Los Angeles County, and all across Southern California.