Bankruptcy provides relief from medical bills for many in Tennessee

On behalf of Bill Maddox

There is no doubt that life for many in Knox County is difficult. Since the economic downturn, families and single people have been struggling to recover from a number of challenges including lower wages, decreased property values, fewer jobs and even the loss or increasing cost of health insurance. The rising costs of health care can lead to astronomical medical bills, especially if someone is diagnosed with a serious illness or has an unexpected medical emergency.

However, many are finding that they can turn to bankruptcy as a way to discharge debts accumulated by medical care and receive a fresh start.

Overwhelming medical debt

In 2009, CNN reported an increase of 50 percent in the number of bankruptcies being attributed to medical bills. In a study conducted in 2007 revealed that some people had decreased income due to illness or had mortgaged their home to pay off medical debt. As a result, over 60 percent of bankruptcies were attributed to medical expenses.

More recently according to The Huffington Post, many people who had no prior trouble meeting their financial obligations, including medical care, now are unable to do so. Some have used credit cards to pay off medical bills but that strategy can sometimes backfire since the payments on these cards can also become overwhelming because of interest rates and penalties. As a result, many people cite medical debt as the catalyst that sent them into bankruptcy.

Benefits of filing for bankruptcy

While many look at bankruptcy as a last resort, the benefits of bankruptcy make it possible for people to deal with their debt and move forward in their life. The potential benefits of personal bankruptcy include:

• Possibly retaining property, such as home and vehicle
• Discharge of unsecured debts like medical bills or credit card bills
• A chance to have a fresh financial start
• An end to harassing phone calls and notices from creditors

Bankruptcy can also help people restructure their debt in a way that is easier for them to manage. For example, part of the bankruptcy process may allow for the consolidation of debt into a more affordable payment or to have a portion of the debt forgiven while agreeing to pay the remaining balance.

Bankruptcy requirements in Tennessee

For people in Tennessee considering personal bankruptcy, the 2005 Bankruptcy Act requires them to go through an assessment before they can file to determine if they qualify for Chapter 7 or will need to file for Chapter 13 bankruptcy. In order to qualify for Chapter 7 bankruptcy, the person would need to show that he or she cannot pay more than 25% of their total amount of debt.

In addition to showing the need for bankruptcy, a petition needs to be prepared and submitted along with documentation of what property would be exempt from the bankruptcy according to Tennessee law. There are a number of items that can be exempt from the bankruptcy proceeding such as insurance, pensions, personal property and items related to their profession. Bankruptcy can be a time-consuming and difficult process so someone deciding to file will likely benefit from the assistance of an experienced bankruptcy attorney.