Bankruptcy is a legal process where a person can obtain forgiveness of their debts in exchange for giving up personal property or agreeing to payment arrangements. Medical bankruptcy is a common reason, especially in countries without government-sponsored healthcare. The process is long and wordy, and other options should be explored first. Filing for bankruptcy can reduce debt, but it can also have disadvantages, such as difficulty getting approved for loans or credit in the future.
Bankruptcy is a legal statement of a person’s complete inability to pay their debts. The precise legal processes of bankruptcy typically differ between countries, regions, and states; however, they generally involve an individual making arrangements to obtain forgiveness of their debts in exchange for giving up personal property or agreeing to some type of payment arrangement. One of the most common reasons is known as medical bankruptcy, where a person ends up in debt due to bills related to a serious illness or injury.
Medical failure tends to be more common in countries that lack government-sponsored healthcare. People in these areas can buy health insurance to cover medical bills if they have the money, or they can choose to opt out of insurance and pay the bill for medical bills in full. Even those with health insurance may still be liable for any medical bills that the insurance company denies. If an unforeseen illness or injury occurs, a person may find they cannot afford all the bills for office visits, lab tests, prescription drugs, or surgery.
The medical bankruptcy filing process is typically long and wordy. There are various other options that someone can look into first. In some regions, hospital or insurance billing services may be more lenient if a person attempts to pay even small portions of the bill over an extended period of time. He or she may also try negotiating smaller fees or even ask for charitable donations.
If a person is unable to make payments or find other solutions to resolve their medical debt, they may choose to file for bankruptcy. A judge will examine the person’s debts and personal property or other financial assets to determine whether they qualify for bankruptcy under that area’s specific bankruptcy laws. If the bankruptcy judge decides that the person is eligible for bankruptcy, he or she is no longer responsible for paying full medical bills.
While filing for medical bankruptcy can reduce the amount of debt a person has, it can also have some possible disadvantages. People who have been officially declared bankrupt may find it difficult to get approved for any type of loan or credit for a number of years afterward. Most areas have laws that limit how often a person can file for bankruptcy. Therefore, people are generally advised to only use bankruptcy as a last resort because if they run into new debt later, they may not have this option available.
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