Bills are probably your last concern when you need medical treatment. However, when you feel well again and receive the final bill, the amount could be shocking. Thousands of Americans find themselves in this position every year. If this is you, bankruptcy may be a viable option. The question is, can you declare bankruptcy on medical bills?
Bankruptcy for Medical Bills
Medical bills can be discharged if you file bankruptcy. This is because medical bills are called non-priority unsecured debt. This means the federal government does not see the debt as a priority to be paid. In contrast, priority debt such as tax bills, child support, and most student loans cannot be eliminated.
Bankruptcy can be extremely beneficial, but there are always considerations to be aware of that may impact you by filing for relief. If you own a lot of property (real or personal) with lots of equity you could potentially be forced to sell some of your property to benefit your creditors. This is not a typical requirement of most people who I represent however, and most of my clients never lose anything. Few people who seek Chapter 7 bankruptcy relief have enough property with equity in it to trigger the sale of anything they own. It is something that a small number of prospective clients need to consider however. There is also the chance that by filing for bankruptcy relief that your credit score takes a hit. This is by no means guaranteed however, and many of my clients actually have a higher credit score 6 months after filing for bankruptcy relief. Each persons situation will dictate the possibility of a hit to their credit.
If you would like to move forward with bankruptcy to pay off your medical bills, it is imperative you work with a bankruptcy attorney. An attorney can ensure you are following the process correctly to safely eliminate your medical bills.
Chapter 7 Bankruptcy and Medical Debt
Chapter 7 Bankruptcy is designed to help people who can’t afford to repay their debt. The court will consider your debt, income, and assets that can be sold in order to allow your case to proceed to discharge. Typically, chapter 7 Bankruptcy will discharge your medical bills in only months.
To qualify for Chapter 7 Bankruptcy you must pass a means test, which is based primarily on your income and household expenses. If you qualify, non-exempt (or non-protected) assets will be liquidated to pay off debt. The process usually takes three to six months from start to finish. Additionally, the bankruptcy will be on your credit score for ten years.
Chapter 13 Bankruptcy and Medical Debt
Chapter 13 Bankruptcy makes repaying your debt more manageable. After taking into account your debt, income, and assets, your proposed plan for reorganization for paying back all or some of your debt is reviewed and confirmed by the court. This proposed plan includes your medical bills. Once the plan is confirmed by the court your creditors start to be repaid over a period of time between 36 and 60 months. Your attorney will review with you in more depth how this will work at your initial consultation.
To qualify for Chapter 7 Bankruptcy, debt cannot exceed a certain level. You must have no more than $394,725 in unsecured debt and no more than $1,184,200 in secured debt. A Chapter 13 Bankruptcy can take several years to complete. So there are many different factors that will determine whether you would be better served in filing either a chapter 7 or 13 bankruptcy to deal with your medical debt. Often, it is the presence or absence of other types of debts such as mortgages or car loans, that tip the balance one way or the other. But there are two powerful tools available to you in dealing with your medical debts.
If you are considering bankruptcy, contact an experienced bankruptcy attorney. Ken Elmer is a bankruptcy attorney in Tuscaloosa and Jasper, Alabama.