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Good Credit, Medical Bills, and Filing for Bankruptcy

You have excellent credit, but you've racked up some substantial medical bills. Is filing for bankruptcy a viable option?

Your good credit will definitely take a hit if bankruptcy is filed. On the flip side, if unpaid medical bills prompt a flurry of late-payment notices, and eventually the medical provider hands you over to collections or wins a court judgment against you, that doesn't bode well for your credit rating either.

Filing for bankruptcy is a tool to help you regain your financial footing, but it should be a last resort. Explore other options first. For instance, make sure all your available insurance coverage has been utilized. In addition, if your bill (or a chunk of it) was for uninsured medical costs, your medical provider may offer a significant discount.

Depending on your income, you may qualify for the Disproportionate Share Hospital (DSH) program, which affords you free or reduced-cost hospital care for medically necessary services.

If filing for bankruptcy is necessary, Chapter 7  and Chapter 13 bankruptcy are your options. Chapter 7 is a good choice for those with low income and low-equity assets. All medical debt will be erased.

Those who are ineligible for Chapter 7 bankruptcy, or have assets they might lose in Chapter 7 can turn into Chapter 13. You will pay back a portion of your medical debt through a restructured payment plan; the remaining debt will be discharged.

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