DOES BANKRUPTCY COVER MEDICAL DEBT?
Don’t look now but the cost of medical care in the United States continues to rise and there is no clear relief in sight – certainly not in 2023 – as companies, organizations and individuals navigate through an unstable economy. That’s according to the current Mercer’s National Survey of Employer-Sponsored Health Plans.
The survey reported by Businesswire and the Society for Human Resource Management found that employers in the U.S. can expect medical plans per employee to rise 5.6 percent on average in 2023. The cost-increase forecast is based on the first 864 employers with 50 or more employees responding through August 4.
Many, many people struggle with paying their medical bills. The rising costs of healthcare and patients’ inability to cover themselves and their families with sufficient health insurance has driven people to search for ways that they can be free of their medical debts.
Which brings us to the question: Can filing for bankruptcy help you wipe out debt from your medical bills here in Wisconsin? The answer is a resounding YES! Under Chapter 7 bankruptcy in the Badger State medical debt can be completely cleared.
Under Chapter 7 bankruptcy there are four classifications of debt. These include:
- Secured debts
- Unsecured debts
- Priority debts
- Nonpriority unsecured debts
Medical debts fall under the last category, nonpriority unsecured debts. Further, there is no cap on how much of your debt can be erased if you file for Chapter 7 bankruptcy. Once you relieve medical debt through Chapter 7 you relieve all of it. If you are overwhelmed by your medical bills and need a fresh start, declaring medical bankruptcy will stop creditors from pursuing you for medical debt repayment.
Chapter 13 bankruptcy treats unsecured debts like medical debt differently than Chapter 7. Although unsecured debts will still be wiped away at the end of your plan, it’s usually necessary to repay a small percentage of these debts during your plan depending on how much disposable income you have and the amount your unsecured creditors would have received if you had filed for Chapter 7 bankruptcy.
Before you file for bankruptcy to rid yourself of medical debt under Chapter 7 or under Chapter 13, there are several things you need to understand:
- Costs – In Wisconsin in 2022 it costs $335 to file for Chapter 7 bankruptcy and $310 to file for Chapter 13 bankruptcy
- Filing Without a Lawyer (Pro Se) – This is not a good idea. You will need expert counseling to guide you through the filing process. An attorney can help you qualify for Chapter 7 even when you thought you couldn’t. You’ll want legal representation when you meet with creditors and, by law, only a licensed attorney can provide this service. Filing for Chapter 7 improperly may force you to file for Chapter 13 and pay off a percentage of your unsecured debts. It may also force you to lose assets you didn’t know how to protect. You will need help filling out the forms and paperwork. Finally, if you miss a deadline it could mean delays or even dismissal of your case.
- Bankruptcy and Your Credit Report – Bankruptcy, even when due to medical bills, hurts your credit score. It can stay on your credit history report between 7 and 10 years depending on which type of bankruptcy you choose.
- Lending Risk – Filing for bankruptcy typically also increases your lending risk in the eyes of lenders. This will make it harder for you to get financing for big purchases including homes and car loans.
No matter which avenue you choose, filing for bankruptcy will be a very stressful, frustrating and exhausting period in your life. There will be an overwhelming amount of information you will need to understand before you decide to file. This is where you will need assistance from an experienced professional bankruptcy attorney to help you sort things out, guide you through the filing process and restore your financial peace of mind.
For more information about bankruptcy and how we can help you, call Milwaukee Bankruptcy attorney Michael Burr and the experts at the Burr Law office at (262) 827-0375 or visit www.burrlawoffice.com.