Medical debt continues to be a leading cause of financial distress for many Americans, and New Jersey residents are no exception. In a detailed article titled “Can My Medical Debt Be Paid Off With Bankruptcy?”, New Jersey bankruptcy attorney Daniel Straffi (https://www.straffilaw.com/can-my-medical-debt-be-paid-off-with-bankruptcy/) explains how individuals burdened with overwhelming healthcare expenses may find relief through the bankruptcy process. The article, published by Straffi & Straffi Attorneys at Law, provides a comprehensive overview of how bankruptcy can address significant medical liabilities.
Medical debt is one of the most common types of unsecured debt in the United States. According to Daniel Straffi, a New Jersey bankruptcy attorney, this type of debt is dischargeable under federal bankruptcy law. He clarifies that although no separate category of “medical bankruptcy” exists, individuals can seek relief through Chapter 7 or Chapter 13 bankruptcy, depending on their financial circumstances. These legal options offer individuals a structured way to manage or eliminate their medical bills and begin the journey toward financial recovery.
The article notes that bankruptcy may be a viable option for individuals who are facing lawsuits, foreclosure threats, or collections related to medical expenses. A New Jersey bankruptcy attorney can help assess whether Chapter 7, often referred to as liquidation bankruptcy, or Chapter 13, a wage earner’s plan, would better suit an individual’s needs. Daniel Straffi emphasizes that these legal pathways can offer significant protections, such as stopping debt collection actions and allowing for the discharge or reorganization of debts. “Bankruptcy can offer a level of protection and allow you to recollect yourself and gather your resources in the interest of a fresh start,” says Straffi.
In Chapter 7 bankruptcy, eligible debtors may have their non-exempt assets liquidated, with the proceeds going toward debt repayment. Once the process is complete, most unsecured debts, including medical bills, are discharged. However, not everyone qualifies for Chapter 7. Eligibility is determined by a means test, which compares an individual’s income to the median income in New Jersey. If the individual’s income exceeds the threshold or if they have sufficient disposable income, they may be required to file for Chapter 13 bankruptcy instead.
Chapter 13 bankruptcy, also explained by Daniel Straffi, involves a court-approved repayment plan spanning three to five years. Unlike Chapter 7, this option allows individuals to keep their assets while repaying a portion of their debts over time. Medical debt, along with other types of unsecured liabilities, can be included in this structured plan. This form of bankruptcy is especially useful for those who have a steady income and want to avoid losing important property, such as their home or vehicle.
The article also addresses the New Jersey statute of limitations on medical debt, which is six years. After this period, creditors can no longer pursue legal action to collect the debt. However, ignoring lawsuits can still lead to default judgments if not addressed in time. This legal nuance underscores the importance of consulting a New Jersey bankruptcy attorney like Daniel Straffi when managing debt and legal threats.
Additional state-specific programs that may assist New Jersey residents before considering bankruptcy are outlined in the article. These include the Hospital Care Payment Assistance Program (Charity Care), the Medical Emergency Payment Program, and the Catastrophic Illness in Children Relief Fund. These initiatives provide income-based financial relief, demonstrating New Jersey’s commitment to reducing the impact of medical debt. The Louisa Carman Medical Debt Relief Act further protects residents by prohibiting medical debt from being reported to credit agencies and restricting aggressive collection efforts.
The article explains how medical debts incurred after the bankruptcy filing date are not included in the case and must be handled separately. Daniel Straffi advises individuals to carefully time their filings to avoid accumulating new, non-dischargeable medical bills. He also discusses the long-term effects of bankruptcy on credit scores, noting that while a Chapter 7 filing remains on a credit report for up to ten years, and Chapter 13 for up to seven years, individuals can gradually rebuild their credit through responsible financial behavior.
Before filing, individuals must complete mandatory credit counseling and debtor education courses. These are designed to help assess whether bankruptcy is the most appropriate path and to provide tools for managing finances post-bankruptcy. This educational component ensures that filers are informed and prepared for the financial responsibilities that lie ahead.
While alternatives to bankruptcy such as negotiating with creditors or using credit cards to manage medical debt are mentioned, the article cautions that these methods can lead to deeper financial issues. For many, bankruptcy provides the most comprehensive solution, halting collection actions and offering a route toward financial stability.
Daniel Straffi, a dedicated New Jersey bankruptcy attorney at Straffi & Straffi Attorneys at Law, encourages individuals overwhelmed by medical debt to explore their legal options. His guidance throughout the article makes clear that while bankruptcy carries consequences, it can also offer meaningful relief and a path forward for those facing unmanageable healthcare expenses.
Those seeking solutions to mounting medical debt are encouraged to evaluate their options and consult a qualified legal professional for guidance.
About Straffi & Straffi Attorneys at Law:
Straffi & Straffi Attorneys at Law is a New Jersey-based legal firm offering support to individuals navigating bankruptcy and debt-related challenges. The firm provides guidance tailored to clients’ financial circumstances, focusing on bankruptcy law and its application to real-life financial struggles. Led by attorney Daniel Straffi, the firm is committed to helping residents regain financial control through structured legal solutions.
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