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Chapter 7 bankruptcy's impact on medical debt

Chapter 7 is, by far, the most common type of bankruptcy individuals file for. According to data, 794,960 total bankruptcy filings took place between January 1st, 2016 and December 31st, 2016. Out of all those filings, 490,365 were Chapter 7. 

Chapter 7 bankruptcy comes with numerous benefits to people who need to get out from under debt. Before deciding which bankruptcy to file for, you need to look at your debts and determine which one will help you the most. In the event you have a ton of medical debt you will be unable to pay off during your lifetime, then Chapter 7 bankruptcy can assist you. 

How does bankruptcy treat medical debt?

No matter which type of bankruptcy you file for, all your debts become separated into different categories. Some debts receive special priority, and you cannot get rid of them through bankruptcy. Student loan debt would fall into this category. Fortunately, medical debt does not. In the eyes of the law, medical debt is a general unsecured debt. You can eliminate it through bankruptcy. Credit card debt also falls into this category. That means that if you had to pay for any medical expenses with your credit card, then you can also ease that burden through bankruptcy. 

Will you need to pass a means test?

To qualify for bankruptcy, you need to pass a means test. This is a standard used to determine if you are truly incapable of paying off the debt on your own. If you make too much money, then you may not be able to qualify for Chapter 7 bankruptcy. However, you may still qualify for Chapter 13 to discharge a portion of your debts. To get a sense of whether you will pass, you need to look at Texas' median income level. If your income falls below that level, then you will likely qualify. If your income is higher, then you will need to move on to other qualifying tests to see whether you can pursue Chapter 7. 

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