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Millions of Americans are struggling with unpaid medical bills. In fact, medical debt is the number one reason people file for bankruptcy. If you find yourself with insurmountable medical debt, you may be wondering if bankruptcy is right for you. Our California bankruptcy team will answer the question and provides information on which bankruptcy chapters to consider to wipe out your medical debts.

What Is Medical Bankruptcy?

"Medical bankruptcy" is not an official legal chapter of bankruptcy. That doesn't mean filing for bankruptcy can't help with your healthcare bills. In fact, for many faced with overwhelming amounts of medical debt, bankruptcy is the best option to give your finances the reset it needs.

The two most common In California are Chapter 7 and Chapter 13 bankruptcy. The majority of bankruptcies are filed under Chapter 7. This is because California has a very high standard for qualifying for a Chapter 13 bankruptcy. To be eligible for Chapter 13, you must have regular income and prove that you can repay your debt within three to five years. If you don't meet these requirements, you'll likely file Chapter 7.

Do I Qualify for Bankruptcy?

To qualify for bankruptcy, you must first pass a "means test." The means test determines whether your income is low enough to qualify for Chapter 7 bankruptcy. If your income is too high, you may still be able to file for Chapter 13. An experienced bankruptcy lawyer will assess your situation and guide which bankruptcy chapter is right for you.

What Happens to Your Medical Debt After Filing For Bankruptcy?

Filing for bankruptcy will give you a "fresh start." This means that most, if not all, of your debts will be discharged or wiped out. Medical debt is treated like any other unsecured debt in bankruptcy. If you file for Chapter 7 bankruptcy, your medical debt will be discharged with your other debts, such as:

  • Personal loans
  • Credit card debt
  • Back rent
  • Past-due utility bills

Benefits of Chapter 7 for Medical Debt

An immediate benefit of filing for bankruptcy is automatic stay. An automatic stay is a legal provision that prevents creditors from taking any collection action against you. This includes wage garnishments, foreclosure, and repossession. The automatic stay will also stop most lawsuits and contact from creditors.

Another benefit of Chapter 7 is that it can help you keep your property. In California, you can exempt (or protect) certain types of property in bankruptcy. Exemptions include your home, car, retirement accounts, and personal belongings.

Begin Your Journey to Financial Freedom Today

If you're struggling with medical debt, bankruptcy may be your best option. Our experienced team of bankruptcy attorneys at RHM LAW LLP will guide you through the process and help you find the best solution for your financial situation.

Contact us at (213) 344-0043 or through our online contact form.