Can You File Bankruptcy on Medical Bills?
With rising healthcare costs in the United States, it’s no wonder that many people are struggling to pay their medical bills. Recently, researchers found that medical bills are the main contributor to almost two-thirds of all bankruptcies filed nationwide.
With so many people filing for bankruptcy due to costly medical expenses, it is natural to wonder if medical bills can be discharged in bankruptcy. The short answer is: Yes, they can almost always be discharged. But depending upon your overall financial condition, it may be a better strategic decision to pay back some portion of the medical bills through a Chapter 13 bankruptcy, as explained below.
Medical Bills After Filing Chapter 7
If you file for Chapter 7 bankruptcy, you are filing for what is known as a “liquidation” bankruptcy. In a liquidation bankruptcy, most of your assets will be sold so you can pay back as much money to your creditors as possible. Once you have sold all your assets, the bankruptcy court will discharge your remaining debts, meaning you no longer have to pay them. However, you must pass a means test to be eligible for Chapter 7 filing.
Medical bills are known as “unsecured” debts, meaning you did not have to put up any collateral when you incurred the debt. When you file for Chapter 7 bankruptcy, unsecured debts are a lower priority than secured debts like a mortgage or car loan. As a result, medical debts are usually entirely discharged if you file for Chapter 7 bankruptcy. Once the bankruptcy proceedings are complete, you can get a fresh start.
Medical Bills After Filing Chapter 13
When you file for Chapter 13 bankruptcy, you are filing for a “reorganization” bankruptcy. In a Chapter 13 bankruptcy, you do not have to sell off all your eligible assets. To keep more of your assets, you must agree to a plan to pay back most or all of your debts over the next three to five years. If the bankruptcy courts approve the plan and you meet all the terms, any remaining debts you have will be discharged.
As with Chapter 7 bankruptcy, medical bills are considered unsecured debts in Chapter 13 bankruptcy cases. However, you will likely have to pay back some of your medical debts under a Chapter 13 bankruptcy plan. You will make payments to a trustee that will then redistribute your payments to your creditors.
Certain debt limits apply to Chapter 13 bankruptcies that don’t apply to Chapter 7 bankruptcies. The percentage of your debt that will be dismissed depends upon your debt, income level, and other state-specific rules.
If you want to keep more of your assets after filing for bankruptcy, Chapter 13 may be the answer. But be sure to consult a knowledgeable bankruptcy lawyer before making your decision. If you miss a payment under a Chapter 13 bankruptcy plan, you may have to pay back all of your debts. You also can’t open new lines of credit while making Chapter 13 payments.
Contact a Bankruptcy Lawyer to Evaluate Your Options
If you are struggling under the weight of unpaid medical bills, the Ohio bankruptcy lawyers at Amourgis & Associates, Attorneys at Law are ready to discuss your situation and help you determine whether filing for bankruptcy fits your situation. We understand how overwhelmed you might be feeling, and we’re ready to help get you back on your feet. Contact us today for a free consultation.
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At Amourgis & Associates, Attorneys at Law, we only represent consumers. We fight for regular people who have been seriously hurt in accidents. We fight for people who are being crushed by overwhelming debt and need a fresh start. We fight for individuals and families. Never businesses. Never insurance companies. We are loyal to the consumer.
