Can Bankruptcy Clear Medical Bills?
Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.
Medical bills are one of the biggest expenses a person will face in their life, and unfortunately can leave many people feeling unable to climb out of the financial hole into which it pushed them. One of the biggest questions for those considering bankruptcy is whether or not medical bills can be discharged. For those wondering, there is good news; medical debt is generally considered unsecured, non-priority debt, which means it can be forgiven or “discharged”.
That said, a bankruptcy case cannot be limited solely to medical bills but will apply to the filer’s qualifying debts across the board. Depending on the type of bankruptcy, the filer may or may not have to commit to a repayment plan for the outstanding values. However, if someone does not qualify to file for bankruptcy, this does not leave them entirely without options for managing draining medical bills. It may be possible to negotiate your costs or work out a repayment plan with the care provider.
Chapter 7 and Chapter 13 bankruptcies can both discharge medical debt, but the latter may require a repayment plan.
Chapter 7, sometimes referred to as “fresh start” or “clean slate” bankruptcy is generally considered the most favorable. When an individual qualifies for a Chapter 7 bankruptcy, their dischargeable debts will effectively be erased without the requirement for repayment; additionally, the filer may be able to retain certain exempt property items, including a car or home. However, for someone to qualify for Chapter 7 bankruptcy they must first pass the means test (i.e. prove that their household income falls below the average for their area), and cannot have filed for bankruptcy in the last eight years. However, for those who do not qualify for a Chapter 7 bankruptcy, there are other options.
Chapter 13 is another type of bankruptcy that allows filers with consistent income to develop a repayment plan for all or some of their debt. This type of bankruptcy is not income-based, and while it does not carry all the charm of total forgiveness of dischargeable debts, it’s a good way for struggling individuals to get on top of their debt again rather than the other way around. Chapter 13 bankruptcies may involve other protections and exemptions on a state-by-state basis.
All dischargeable debts are generally included in the bankruptcy, not just medical bills.
If your primary concern in considering bankruptcy is paying back or having your medical bills forgiven, that is completely fine. It’s important to note that you typically cannot pick and choose which debts you want the bankruptcy to apply to. For those who are struggling to get out of a financial hole, this could be great news. Some other types of dischargeable debt include credit card debt, utility bills, back rent, and gym memberships to name a few.
Bankruptcy will affect your credit score, but with help, the damage can be mitigated.
However, bankruptcy does affect your credit score for 7-10 years after filing, so during this time, it might be difficult to qualify for home loans and leases. This is part of the reason it is so important to contact a bankruptcy attorney as soon as you begin to suspect bankruptcy might be a viable option for you. These attorneys can help negotiate your debt both before and after bankruptcy, and can even provide you with invaluable guidelines and resources to get your credit back on track as soon as possible.
To learn more about how bankruptcy can help with medical bills, or for help filing, reach out to a bankruptcy attorney in your area.