If you have suffered a severe medical crisis it’s easy to rack up hundreds of thousands of dollars in medical debt, especially if you do not have good healthcare coverage. Recently on our bankruptcy forum a user asked, “Can I discharge my hospital bills if I file bankruptcy?”
The answer to the question is it depends. Although filing Chapter 7 bankruptcy will allow many users to discharge hospital bills, not everyone will qualify to file Chapter 7. In fact, due to changes in bankruptcy laws, more and more debtors have been forced to repay a portion of their debts by filing Chapter 13 bankruptcy.
What is Chapter 7 and what debts are discharged?
Assuming you qualify to file Chapter 7 bankruptcy, certain unsecured debts such as credit card bills, hospital bills, and unsecured personal loans may be discharged. Unfortunately, filing Chapter 7 bankruptcy will also allow the bankruptcy court to assign a trustee to your case. The trustee is then legally allowed to take certain non-exempt assets, sell them, and use the proceeds of the sale to repay your creditors. So while medical debts will be discharged, you may have your home, car, property and other items sold.
Debts not discharged in Chapter 7 bankruptcy
Hospital bills and unsecured personal loans are generally discharged in Chapter 7 bankruptcy, but there are certain debts which are considered nondischargeable. For instance, if you owe recent taxes, have unpaid child support or spousal support obligations, or you have federal school loans (exceptions exist), these are not discharged.
Chapter 13 bankruptcy and hospital bills
Now, let’s reexamine the question. What if you have hospital bills but you have to file Chapter 13 bankruptcy?
If the court decides your income is too high or you have too much disposable income you will not be allowed to file Chapter 7 bankruptcy. In this case, however, you may be able to restructure your debt payments over a 3 or 5 year debt repayment plan and file Chapter 13 bankruptcy.
If you have overwhelming medical debt and creditors are threatening lawsuits, bank account levies, or wage garnishment, Chapter 13 bankruptcy may still be a good way to stop harassing creditor actions and give you a little breathing room to repay your debts.
After you file your Chapter 13 bankruptcy petition you can work with your bankruptcy lawyer to recreate a debt repayment plan. All unsecured debts which are not repaid within the plan payment period are discharged at the completion of the plan. Other debt obligations such as a mortgage or car loan which remain at the end of the debt period must be repaid. Secured debts are not discharged.
Hospital bills is bankruptcy an option for me?
Unfortunately, given the rampant greed and overcharging by doctors, hospitals and the number of uninsured patients, medical bills have skyrocketed over the last twenty years. If you have a major illness and do not have insurance (or even if you do) you could easily owe thousands of dollars in medical debt. Add a job loss, unexpected death, or divorce and you could be facing debt obligations you will never be able torepay. Talk to a bankruptcy lawyer to determine your options.
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