If you owe more credit card and medical debt than you can afford to pay, you are not alone. Many Americans are in the same situation. These are among the most common debt problems I see.
Freeing Yourself from Credit Card and Medical Debt Through Bankruptcy
You can completely get rid of credit card and medical debt through either a Chapter 7 or Chapter 13 bankruptcy case.
In Chapter 7, you permanently eliminate unsecured debts without making any more payments on them. You can still keep important protected assets such as your home, household goods, retirement accounts, vehicles and bank accounts.
Most people needing bankruptcy relief will qualify for Chapter 7 protection under the income guidelines known as the Means Test. If you do not qualify under the Means Test, you may choose Chapter 13 relief. In Chapter 13, you pay some portion, but usually not all, of your unsecured debt.
What is Unsecured Debt?
Unsecured debt is debt that is not tied to (“secured by”) anything that can be taken back by the creditor if you are unable to pay your debt. Both credit card and medical debt are unsecured. If you don’t make your payments, there is nothing the creditor can take back or repossess.
Unsecured creditors — with debt such as credit card and medical debt — may not seize your property simply because you owe them money. They must follow state and federal laws as to how they may collect the debt. Even if they sue you and take a judgment against you, you may take steps to protect what you own and earn from seizure by garnishment, levy, or liens.
The Most Important Thing to Know About Unsecured Debt
It is much easier to deal with debt in bankruptcy if it is unsecured. It is almost never a good idea to borrow on your home to pay credit card and medical debt if you are already struggling to pay that debt.
If you turn unsecured debt into secured debt tied to your home (such as through a home equity loan or line of credit), you are now at risk of losing your home if you are unable to pay the new loan. Because unsecured debt can be very effectively dealt with through bankruptcy, you don’t need to borrow money on your home to handle your credit card or medical bills.
You should think very carefully before you borrow on your home or take out a title loan on your car to pay off or refinance unsecured debt. Don’t put your home or car at risk by borrowing on them to pay unsecured debt–it is almost always the case that you can more effectively deal with that unsecured debt in a bankruptcy case without needing to put your home or car at risk.
If you want to permanently wipe out unsecured debts under Chapter 7, I can help you understand whether you qualify and how to keep what you own. If you think you need to consider Chapter 13, I can help you to decide if a Chapter 13 repayment plan is both necessary and affordable.
Set up your free consultation today by calling my office at 865-470-4250 or contacting me online