Medical Bills & Bankruptcy
Medical debt is one of the leading causes of bankruptcy in the US.
Below is a guide to help you understand how filing for bankruptcy can help you eliminate or consolidate your medical bills.
Overview of Medical Debt
Some types of debt are treated as special priorities and cannot be wiped out through bankruptcy. Luckily, medical bills do not fall into this category.
In bankruptcy, medical bills are similar to credit cards in that they’re considered general unsecured debts. This means that medical bills are a type of debt that can be eliminated through a bankruptcy filing.
However, medical debt is treated differently depending on the type of bankruptcy you file for, with Chapter 7 being the most common and Chapter 13 being slightly more complicated.
Chapter 7 Bankruptcy and Medical Debt
In Chapter 7 bankruptcy, you eliminate most or all of your debt. Should you qualify for Chapter 7, all medical bills and other unsecured debts will be wiped out.
In Chapter 7, there is no limit to the amount of medical debt you can eliminate. However, in order to qualify for this type of bankruptcy, you must pass a means test to prove adequately low income.
Medical bills paid on a credit card will also be eliminated, along with all other credit card debt.
Chapter 13 Bankruptcy and Medical Debt
In Chapter 13 bankruptcy, your debts are consolidated and you pay them back gradually on a payment plan. Medical debts are lumped into this plan. The amount you must pay under Chapter 13 depends on your income, expenses, and assets.
Under Chapter 13, creditors receive a portion of the amount you are paying towards your debts, which is typically a very small percentage of the overall amount you’ll pay.
Please note: you may not be eligible for Chapter 13 bankruptcy if your medical and other debts exceed specified debt limits.
Here at Burr Law Office, we recognize that filing for bankruptcy can be a confusing and exhausting process. We are here to advocate for you. Give us a call today.