Concerns about medical debt continue to grow in Tennessee and across the United States. According to a study published in 2013, people who have cancer are 2.5 times more likely to declare bankruptcy. The bankruptcy system is designed to give people a fresh start, and it can be a good financial strategy in some cases. However, it also usually requires making sacrifices. The two most common kinds of bankruptcy are Chapter 7 and Chapter 13.

Chapter 7 bankruptcy, also called liquidation bankruptcy, can permanently wipe out medical debts as well as credit card balances, payday loans, cash advances, auto loans and mortgages. The trustee of the case will liquidate the debtor’s assets, with some exceptions, in order to pay debts to the extent possible. In many cases, the debts are eliminated without repayment and the debtor is allowed to keep important assets.

Chapter 13 bankruptcy is designed for people who earn regular income. It allows debtors to repay their debts in monthly installments, paid to the trustee for a period of between three and five years. In a Chapter 13 case, the debts are managed and paid down. The debtor is not always required to pay debts in full.

The action of filing a bankruptcy case triggers an automatic stay of collections efforts. Creditors can no longer attempt to collect from the debtor other than through the bankruptcy court. For people in Tennessee who are struggling to pay down personal debt, there may be various solutions. An attorney with experience in bankruptcy law may be able to help by examining the facts of the situation and laying out options for reducing debts. Legal counsel could also negotiate debt settlements with creditors.