Posted on: 12th Dec, 2012 01:22 am
I need some advice on my brother possibly filling for bankruptcy after some medical issues that have incurred some debt he cannot pay for right now. So, while in college, my brother was affected with a mental illness that left him with some hospital expenses that were not covered by his insurance. I'm not sure the number but it's enough that he cannot pay for them right now and his credit is shot. He also incurred collections on a couple of credit cards while he wasn't being responsible which my parents have battled to pay back. He has since finished college and is struggling to find a job (so he has some student loans), but I know that in the future if he wants to ever purchase a home, new car, or attain a decent credit card he won't be able to because of his poor credit. It seems like Chapter 7 is his best bet when it comes to these debts, since he doesn't have any mortgage liens or auto liens that he needs to hold on to. I would like him to have a clean slate to start with. My main question is will these medical expenses be gone, and in your opinion, is this right option for him before deciding to see a lawyer about bankruptcy?
Filing Chapter 7 may be a good option for you. Medical debts and similar types of unsecured debts will be discharged in bankruptcy filing. But students loans, IRS tax debts, etc. won't get discharged.
Yes, this is the right decision as far as discharging medical debt is concerned. Chapter 7 will actually aid your brother to start afresh.
What about the student loans you brother had? If he has taken out federal student loan, then he can apply for a payment deferment and use that money to pay off the outstanding medical bills. This way it'll help him to avoid filing for bankruptcy (which will severely damage his credit rating) as well as repay his medical bills comfortably.