In 2018, the average person in Michigan spent $11,172 on health care expenses. By 2028, health care spending in the United States is expected to rise to $6.2 trillion, and rising medical costs are considered to be a factor in up to 62% of bankruptcies filed by Americans. In most cases, medical debts are treated the same as credit card and other unsecured debt balances in a bankruptcy proceeding. Typically, most or all unsecured debts will be discharged when a person files for bankruptcy.

In a Chapter 7 proceeding, nonexempt assets are liquidated by a trustee, and the money that is raised by the sale of those assets is used to repay creditors. It is worth noting that property is liquidated in about 5% of Chapter 7 proceedings. To qualify for liquidation bankruptcy, a person must pass a means test. The means test compares a person’s income to the median in the state where the bankruptcy petition was submitted.

Those who don’t pass the means test will need to file for Chapter 13 bankruptcy protection. In a Chapter 13 proceeding, a debtor will make payments over the course of three to five years. If a debt remains after the repayment period ends, it may be discharged. A debtor’s monthly payment will be determined by the amount of disposable income he or she has.

Individuals who are eligible to file for Chapter 7 bankruptcy may be able to obtain debt relief in a matter of weeks or months. While their cases are pending, creditors are generally prohibited from calling or otherwise contacting them. An attorney may be able to provide more insight into the potential benefits of a liquidation bankruptcy such as the chance to retain most assets. Legal counsel may also talk more about the process of filing for bankruptcy.