Medical bills add up fast. A simple operation can cost a family thousands, and even push them into bankruptcy. In fact, medical bills are one of the most common reasons people fall into crippling debt. Many in this situation often wonder if bankruptcy can help provide relief for their finances.
Can Medical Debt Be Wiped Out in Bankruptcy?
Yes, medical debt can be wiped out in bankruptcy. Under bankruptcy laws, medical debt is considered general unsecured debts just like your credit cards, and can be eliminated through filing for bankruptcy. Medical debt is one of the common reasons that people file for bankruptcy.
How Medical Bills Are Treated Under Chapter 7 & Chapter 13 Bankruptcy
There are different kinds of bankruptcy that you can file for your debts, including overdue medical bills.
Chapter 7 bankruptcy essentially allows you to wipe your financial slate clean without the worry of making “past due” amounts. Certain property is sold and then used to repay debts. If there is no property that can be resold, many of the qualifying debts will be discharged, or cancelled, once the bankruptcy case concludes.
Chapter 13 bankruptcy allows you to reorganize your debt. You work with a bankruptcy attorney to set forth a plan to repay as much as your debt as possible during a 3-5 year period. Once you have completed the repayment plan, you are no longer responsible for any previous debts, even if through repayment, you were not required to pay the entire amount that was owed. Chapter 13 also stops increases on interest rates, such as the interest rate owed on a credit card.
Is Bankruptcy the Right Option for My Medical Debt?
While bankruptcy can be an effective means to get rid of your medical debt, it may not be the correct choice for everyone, or even the appropriate choice at the moment. There may be times when it might be wiser to wait to file.
Some factors to consider if you are contemplating bankruptcy for medical debt:
- Has your health issue been resolved or will you need additional treatment? If you anticipate more medical issues, you may consider waiting until your illness has been resolved.
- Are you judgment proof? If the creditor has no assets or funds they can seize, you may be judgment proof and bankruptcy may not be necessary.
- Do you have other debts that can discharged? If you have additional debt such as credit card debt, personal loans, or other eligible debt that can be wiped out in bankruptcy, you may benefit from filing soon.
We recommend discussing your concerns with a bankruptcy attorney to help you decide whether bankruptcy is the right option at this time.
Should I Choose Chapter 7 or Chapter 13?
Choosing between Chapter 13 and Chapter 7 bankruptcy is an important decision to make. Weighing both options with a bankruptcy attorney will help you decide which way to file. Also, to help your attorney help you to make the best decision, it’s necessary you provide them with accurate information regarding your finances. It’s also important to remember that some debt is not able to be discharged under either type of bankruptcy. These debts include: student loans, alimony, and child support.
Considering Bankruptcy for Your Medical Bills?
Bankruptcy law was designed to help people who need assistance to make a clean and quick break from the debt. In a few months it can wipe out unsecured debt such as credit and medical debts.
Bankruptcy law can be hard to understand. Because of this, it’s highly advised that you work with a bankruptcy attorney that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time. Let the lawyers at RHM LAW LLP walk you through the process so you can achieve the best outcome possible.