Medical bills and Bankruptcy
Recently on our bankruptcy forum we had a debtor ask, “I have $20.000 in medical debt. Can I file Chapter 7 or Chapter 13 bankruptcy?” This debtor is not alone. With medical costs sky-rocketing, many individuals without great medical insurance face a financial crisis if they become sick or injured. So what are the options for dealing with high medical debts and when can you discharge your debts through bankruptcy? This blog will address these questions.
What is bankruptcy?
Bankruptcy is a legal means to either discharge certain unsecured debts or restructure your debt payments. The bankruptcy process was created to allow certain qualifying individuals the legal means to get a fresh start. It is a very serious decision. It should only be considered after you have researched all of your other options for paying back your debts, and it will generally lower your credit score, making it difficult to get loans or low interest loans for a number of years.
Can medical bills be discharged?
Medical bills are considered an unsecured debt, which means there is no “collateral” attached to the debt that the lender can repossess to pay back the debt (unlike a car or house). Medical bills can be discharged or restructured through bankruptcy.
Now, the first question is to determine if you can file Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy will allow you to discharge your medical bills or medical debts immediately, but some of your assets, those not exempted by your state, can be sold and the proceeds used to repay your creditors. If you have assets you would like to keep Chapter 7 may not be right for you. Additionally, under current bankruptcy laws, your income will have to be below a specific level for you to qualify for Chapter 7 bankruptcy.
If you cannot discharge your medical bills by filing chapter 7 bankruptcy than you may be able to restructure your medical bill payments with a chapter 13 bankruptcy payment plan. This plan is for 3 or 5 years and may allow you to pay only a portion of the debts you owe. Unfortunately, however, chapter 13 will take much longer to complete than chapter 7.
What should I do about my medical bills before filing bankruptcy?
As mentioned above, bankruptcy is a serious decision. It is important to determine if you can pay the debts back. If your medical bills have already been sold to a third party debt collection agency it may be possible that they will agree to a partial payment of the medical bills or may be some type of debt repayment plan.
Another step is to do research about your options. The internet is full of information about bankruptcy, bankruptcy steps, the pros and cons of bankruptcy and other debt solutions. Talking to bankruptcy lawyer can also provide insight about your options, and most lawyers will provide a FREE consultation. Do not be discouraged. You are not alone. There are millions of debtors who are in the same situation you are in and many times it is through no fault of their own.
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