Individuals with overwhelming medical debts may file for Chapter 7 bankruptcy to regain control of their finances. As noted by Credit Karma, a filing provides immediate relief from bill collectors because of the legal protection known as an automatic stay.
After filing, the automatic stay takes effect. The court notifies creditors that the individual seeks bankruptcy and that they must stop further contact. Creditors may no longer call or send threatening letters to collect debts, including medical bills.
Unexpected illnesses may lead to severe financial issues
An unanticipated illness may require taking time off from work to care for a spouse, child or parent. Under these circumstances, the Family and Medical Leave Act requires employers to allow employees to take a leave of absence of up to 12 weeks without fear of losing their jobs. Many companies, however, do not pay workers for their time spent away. With a sudden reduction of income, households may soon begin experiencing unmanageable financial hardships.
A caregiver role may worsen an out-of-work individual’s burden
A study conducted by the AARP revealed that individuals serving as temporary caregivers spent approximately 20% of their personal funds on a loved one’s out-of-pocket costs. Expenses included medical treatment and personal care. Individuals admitted to spending 25% or at least $1,800 of their own money on a relative’s prescriptions, co-pays and medical equipment.
Combined with a leave of absence, individuals may experience not only a loss of regular income; it may also bring an increase in expenses. By the time a family member recovers from an illness, a household may have accumulated numerous outstanding bills.
When a return to work does not help in catching up on past-due bills, bankruptcy may offer a method to move forward. Individuals who qualify for a Chapter 7 filing may find their outstanding credit card and medical debts discharged by the court.