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Bankruptcy often influenced by medical debt

Some tragedies in life are simply unavoidable, no matter how many safety precautions a person may take. Unfortunately, emergencies can push people in Washington into mountains of debt that don't have any foreseeable end. Medical debt in particular can be especially devastating to those who are struggling to pay off their debt.

Medical debt, the Consumer Financial Protection Bureau points out, shows up on the credit scores of roughly 43 million people in America. That is 43 million people who didn't make impulse purchases or ring up credit cards for the fun of it, but millions of people who were pushed into debt for simply seeking out medical care. These unpaid debts can do more than just loom over a person's bank account like a storm cloud; they can also adversely affect credit scores, making financial woes even worse. 

A more in-depth study found that over half of people in debt have nearly $10,000 worth of unpaid medical bills. Of those, nearly 20 percent of people had medical debt that topped out their annual income. With figures such as this, it can be easy to see why the individuals from that data pool chose to file bankruptcy.

Since medical debt is considered unsecured, it can typically be discharged while allowing the person filing for bankruptcy to retain ownership of assets such as a car or home. A person's income generally determines how he or she can handle medical debt. For those under the income limit in Washington, a Chapter 7 bankruptcy can effectively discharge unsecured debt. Individuals who make more than the average state income can still handle these types of debts through a Chapter 13 filing.

Source: qz.com, "", Daniel A Austin, Feb. 12, 2015

Tags: Chapter 7 bankruptcy, filing for bankruptcy

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