It might surprise you to hear that medical bills is the leading cause of personal bankruptcies. Sacramento County ranks poorly among California counties in hospital readmission and hospital admissions. Emergency room visits are high in Sacramento California with an average rate of 290 of every 1,000 patients annually compared to statewide 228 of every 1,000 patients emergency room visits annually. (Source: Sacramento Bee) Ask any bankruptcy attorney why many of their clients filed for Chapter 7 or 13 Bankruptcy. Why did they max out their credit cards or personal loans and now they are facing wage garnishment? Why did they refinance their home and now it is in foreclosure? Why did they cash out their 401k or IRA pension plan?
In 2013 over 20% of American adults are struggling to pay their medical bills, and three in five personal bankruptcies will be due to medical bills. (Nerdwallet.com) This is contrary to the popular misconception that personal bankruptcy is due to irresponsible spending or mismanagement of savings. Unfortunately, Obamacare and Covered California are not a panacea for this epidemic.
Many people drained their savings/retirement, maxed out their credit cards, and even refinanced their homes to pay their medical bills. This is a bad move. First, you should never raid your retirement to pay off medical bills. Second, you should never pay off medical bills with a high interest instrument like credit cards, payday loans, personal loans or auto title loans. Third, you should not take out equity from your home to repay medical bills. Usually, you can arrange to repay your medical bills with little or no interest with your healthcare providers. If you are having trouble keeping up with your mortgage payments, adding to the loan balance will only make it worse.
If all else fails, you might want to consult a bankruptcy attorney. Don't let the stigma of bankruptcy (which is due to the misconception of bankruptcy filing in the first place!) force you to raid your pension or your children's college funds, max out your credit cards, or refinance your home. It is not your fault that you became ill! While large corporations and financial institutions receive billions in government bailouts, Chapter 7 and 13 Bankruptcy are established to give people a second chance to regain their life from the brink of financial ruin.
If you qualify for a Chapter 7 Bankruptcy discharge, you might be able to wipe out your medical bills, credit cards, and unsecured personal personal loans, and keep your properties. If you file a recent bankruptcy or have too much income or assets, you might qualify for a Chapter 13 Bankruptcy discharge, where you only pay a portion of your debt back through a 3 to 5 year payment plan and the rest of your debts get eliminated. A Chapter 13 Bankruptcy does NOT mean that you have to repay 100% of your debt. In most cases, you only pay a portion of your unsecured, nonpriority debt back. The repayment plan depends on the value of your assets and income less reasonable and necessary expenses. When you come in for a consultation with Muoi Chea, Bankruptcy Attorney at the Sacramento, Stockton or Fairfield California office, I will personally go over your options under the bankruptcy code as well as alternatives to bankruptcy and make sure that your assets are protected if you decide that bankruptcy is your best option.